new mexico economy: recent developments and outlook · new mexico economic current situation...

New Mexico Economy:Recent Developments and Outlook

Senate Finance CommitteeJanuary 10, 2018

New Mexico Economic Narrative

• For most of post-Recession, the state’s economic narrative has been driven by ‘external factors’ – oil boom & bust, Obamacare, even Intel job losses and uncertainty at national labs.

• In recent months, the state’s economic narrative is less and less about external factors – oil prices and production are relatively stable, the economic gains due to Obamacare are largely absorbed (and now the state is beginning to pay its share).

• Where does the state on its own?

New Mexico Economic Current Situation

• QCEW says NM lost 537 jobs (-0.1%) in 2017Q1 after a loss of 2,500 (-0.3%) – First loss in two consecutive quarters since 2010.

• CES shows +0.7 for both 2016Q4 & 2017Q1, and +0.9% and 0.7% for 2017Q2 and Q3; BBER estimates 0.2% for 2017Q2 and Q3.

• Changing pattern–in 2017Q1 Mining -1,390 jobs, Healthcare +1,480 (in 2016, Mining -5,700 jobs and Healthcare +4,625 jobs).

• Personal income growth weak (2.0% in 2017Q1 & Q2). Compared to past two years, wage & salaries less of a drag (1.9%; 2016=0.5%) and transfers no longer a positive factor (-0.1%; 2014-2015=8.6%).

• Pressure on public finances less severe – Gross Receipts up 6.9% in 2017Q2; oil prices & production up.

Recent employment data based on surveys is strong. BBER is more cautious.

Sources: CES data available at time of FOR-UNM forecasts (pre-benchmarked); QCEW data current.

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2015 Q1 Q2 Q3 Q4 2016 Q1 Q2 Q3 Q4 2017Q1 Q2 Q3 Q4

CES (Survey) QCEW (Actuals)

BBER Estimates

0.5%

0.7%

1.0%

1.3%

4

New Mexico’s employment comparisons are improved.

Source: US Bureau of Labor Statistics, CES.

Growth

y/y Rank

Growth

y/y Rank

Growth

y/y Rank

Total Nonfarm 0.3% 45 0.7% 39 1.3% 18

Total Private 0.5% 45 0.8% 36 2.0% 12

Mining -19.4% 31 -20.0% 41 -1.7% 37

Construction 0.0% 39 -0.3% 34 6.2% 10

Manufacturing -0.1% 32 -4.4% 46 0.0% 38

Wholesale Trade -0.5% 38 -0.6% 40 -0.9% 35

Retail Trade 0.6% 41 -0.2% 42 0.9% 12

Transportaion & Utilities -0.3% 44 -0.1% 40 4.6% 8

Financial Activities 0.5% 41 -0.4% 45 4.0% 2

Professional & Business Services 1.0% 41 1.9% 23 2.3% 23

Education & Health Services 4.4% 5 3.9% 6 1.3% 35

Leisure & Hospitality 2.4% 34 3.3% 16 3.2% 6

Total Government -0.2% 34 0.2% 40 -1.1% 46

Local Government 0.2% 24 0.3% 36 -1.0% 47

State Government -1.1% 36 -0.1% 37 -1.7% 40

Federal Government 0.6% 33 0.5% 43 0.1% 16

2016Q42015Q4 2017Q4

5

Gains/Losses in Healthcare and Mining are moderating.

Source: US Bureau of Labor Statistics, QCEW.

6

Only recently are signs positive in bothAlbuquerque and Non-Metro regions

Source: US Bureau of Labor Statistics

-6,000

-4,000

-2,000

0

2,000

4,000

6,000

8,000

10,000

Albuquerque Farmington Las Cruces Santa Fe Non Metro

7

General Fund benefitting from higher Gross Receipts and oil revenues (FY18 v FY17, through October)

Source: NM Legislative Finance Committee

$114.0 $6.6

$22.8

$22.2

$24.2

$81.1

$1.0

$22.0

$0 $20 $40 $60 $80 $100 $120

Gross Receipts

Compensating Tax

Selective Sales *

Personal Income Tax

Corporate Income Tax

Oil & Gas Revenues *

License Fees

Investment Income

Millions $

8

Increased drill rig activity and oil production with WTI prices near $60/barrel

Source: EIA, Baker Hughes, ONGARD, IHS Global Insight.

9

Sharp decline in Medicaid transfers, slowing job growth in Healthcare in New Mexico

Source: US Bureau of Economic Analysis, Table SQ35.

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

-$600

-$300

$0

$300

$600

$900

$1,200

$1,500

$1,800

Hea

lth

Car

e Em

plo

ymen

t G

row

th %

Gai

n/L

oss

in M

edic

aid

Tra

nsf

ers

(Mill

ion

s $

)

Increase in Medicaid Transfers - Left Healthcare job growth -- Right

10

Increased residential sales, but no growth in new home building

Source: NM Realtors Association; BBER

Res

iden

tial

Sal

es

Un

its

per

mit

ted

fo

r C

on

stru

ctio

n

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2010 2011 2012 2013 2014 2015 2016 2017

Bernalillo Co Santa Fe Co Dona Ana Co

San Juan Co Oil Patch Other

Building Permits (Right)

11

Economic Outlook

New Mexico Economic Outlook: 2017-2022

• Weaker near term forecast due to disappointing 2017Q1 QCEW employment data, slow single family housing construction, and weaker IHS Global Insight forecast, especially for incomes.

• Jobs forecast gain 4,500 (0.6%) jobs in 2017Q4, closing the year +1,750 jobs (0.2%).

• Jobs forecast gain 6,900 jobs (0.9%) 2018, and 8,725/yr (1.1%/yr) in 2019-2022. This forecast is ~ 1,600 jobs (-0.2%) lower July forecast.

• Income forecast marked down further – 2.7% in 2018, average 4.2% in 2019-2022. This forecast marked down -0.8% in 2018 and -0.3% 2019-2022 due to weaker jobs forecast, lower investment/proprietors’ incomes (from IHS Global Insight) and very weak transfers.

• Oil production to increase gradually, given slightly weaker price outlook.

• Impacts of pessimistic (20%) greater than optimistic (15%) scenario.

Global Insight, January 2018 and October 2017

US Employment Forecast

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

January 2018 October 2017

14

New Mexico Employment Forecast

Source: BBER FOR-UNM, January 2018 and October 2017

-0.4%

-0.2%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

January 2018 October 2017

15

Job Growth by Sector, 2018

Source: BBER FOR-UNM, January 2018

(1,000) 0 1,000 2,000 3,000

Fed. Govt.

State Govt.

Local Govt.

Accom. & Food Svs.

Arts & Recreation

Healthcare & Soc. Asst.

Educ. Svs.

Admin. & Waste Mgmt.

Prof.& Tech. Svs.

Real Estate & Leasing

Finance & Insurance

Information

Transport. & Warehsng.

Retail Trade

Wholesale Trade

Manufacturing

Construction

Mining

-2% -1% 0% 1% 2% 3% 4%

Fed. Govt.

State Govt.

Local Govt.

Accom. & Food Svs.

Arts & Recreation


Educ. Svs.


Prof.& Tech. Svs.


Finance & Insurance

Information


Retail Trade

Wholesale Trade

Manufacturing

Construction

Mining

16

Annual Job Growth by Sector, 2019-2022


-1.0% 0.0% 1.0% 2.0% 3.0%

Fed. Govt.

State Govt.

Local Govt.

Accom. & Food Svs.

Arts & Recreation


Educ. Svs.


Prof.& Tech. Svs.


Finance & Insurance

Information


Retail Trade

Wholesale Trade

Manufacturing

Construction

Mining

(3,000) 0 3,000 6,000 9,000 12,000

Fed. Govt.

State Govt.

Local Govt.

Accom. & Food Svs.

Arts & Recreation


Educ. Svs.


Prof.& Tech. Svs.


Finance & Insurance

Information


Retail Trade

Wholesale Trade

Manufacturing

Construction

Mining

17

New Mexico Employment Gains/Losses by Region, 2017-2022


18

Source: BBER FOR-UNM, January 2018 and October 2017

-4%

-2%

0%

2%

4%

6%

8%

10%

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022January 2018 October 2017

New Mexico Income Forecast

19

New Mexico Income growth by component


-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

Mill

ion

s $

Private Wages & Salaries Government Wages & SalariesDividends/Interest/Rent Transfer PaymentsNonfarm Proprietors' Income Farm Proprietors' IncomeOther Labor Income Social Security Adjustment

20

New Mexico Employment Forecast, Alternative Scenarios

-0.2%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2017 2018 2019 2020 2021

Baseline Scenario Pessimistic Scenario Optimistic Scenario


21

BBER Provides New Mexico –

Economic forecasts and analysis

Customized data access and visualization tools

Contract research

Jeffrey Mitchell, PhDDirector

Jennifer Esquivel505.277.8300

[email protected]

@UNMBBERbber.unm.edu

[email protected]

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