Local experts say state lags in economic recovery

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Business > LA chamber breakfast presenters see some signs of improvment

Many members of the Los Alamos business community were on hand to learn more about the area’s economic outlook at Thursday’s Chamber Breakfast.
Panelists Jeffrey Mitchell, director of the University of New Mexico’s Bureau of Business and Economic Research, REDI manager for the Regional Development Corporation Eric Vasquez and Los Alamos Commerce and Development Corporation Executive Director Patrick Sullivan all indicated that the local economy shows signs of improvement, but that New Mexico — and Northern New Mexico in particular — have lagged behind the rest of the nation in economic recovery.
“New Mexico’s ‘recovery’ has been sluggish at best,” Mitchell said, after highlighting several signs of economic recovery for most of the nation. “Of the 50 states plus D.C., there are only three states, I believe, that still have employment levels below those of the pre-recession period, and New Mexico is one of them. This has had a very significant impact on labor force.”
New Mexico employment levels remain at 4 percent below pre-recession levels.
According to Mitchell, indicators are that New Mexico will see slow, “unspectacular” growth, not reaching 2007 levels of economic activity until 2017. Most of the nation reached that in 2013.
Mitchell pointed to one of the key factors economists look at in terms of labor force recovery is what types of jobs are being created. For most of the nation, professional and business service jobs — which include jobs scientists, engineers, architects, lawyers, accountants and similar positions — have expanded rapidly.
“This has been one of the fastest and strongest sectors of the recovery,” Mitchell said. “It has really had the greatest contribution in terms of net growth of jobs, but more importantly, these are well-paying jobs. So these tend to be the types of jobs that create secondary demand in retail, etc.”
That indicator has bypassed New Mexico. Between 2001-2007, New Mexico ranked sixth in the nation for the number of professional positions within its workforce.
Now the state ranks 50th.
Another measurement of economic strength is the rate of migration to or from a state.
Between 1990-1999, New Mexico added 4,234 residents.
That number dropped by nearly 2,000 over the next decade and since then New Mexico has been losing residents. Between 2010-2012, 5,196 residents migrated to other states. That number jumped to 10,526 from 2012-2013.
Mitchell believes those were largely middle class and lower-middle class families that could not find work here.
Another industry lagging behind the nation is construction.
“In 2005 in New Mexico, we were producing almost 16,000 houses per year,” Mitchell said.” In the most optimistic scenarios, we do not exceed 40 percent of housing production in 2005.”
Another nationwide trend that is likely to affect New Mexico is wage stagnation. Mitchell referred to an analytic tool called the Phillips Curve, which compares unemployment rates to wages. During past economic recoveries, wages increased rapidly in states with the lowest unemployment. During this recovery, wages have remained stagnant even in states with very low unemployment. Mitchell expects that trend to continue.
The reduction in oil prices has spurred growth nationwide — including for New Mexico — by leaving households more money available for consumer spending.
But Mitchell pointed out the downside of that trend. First, it is a one-time boost that does not generate future economic growth. And New Mexico is very dependent on the oil industry.
The downward trend in oil prices has cost the state nearly 200 jobs and a loss of $85 million in “new money” from the industry is anticipated for FY2016.
Mitchell called recent data “much more positive.”
In the first three quarters of 2014, growth was at 1 percent “which is way better than flat.” More recent numbers are “preliminary but positive.”
The fastest growth sector for New Mexico is healthcare, largely due to the Affordable Care Act and Medicaid expansion, with transportation also growing rapidly.
“The increase in Medicaid payments over the first three quarters of 2014 were up more than $630 million dollars,” Mitchell said.
Vasquez began with a brief history of the REDI program, which was launched in 2007 through Los Alamos’ Progress through Partnering program.
REDI’s goals are to “diversify the economy, develop a high-quality workforce, increase the number of higher-paying jobs, retain and attract youth and families and make rural communities vibrant.”
According to Vasquez, REDI’s own statistics support Mitchell’s findings.
“New Mexico has lagged behind the rest of the nation, and Northern New Mexico in particular is lagging behind the rest of the state,” Vasquez said.
Vasquez pointed to job losses between 2008-2012.
“By 2012, the U.S. had basically recovered to the flat point. The state, overall, had grown a little bit,” Vasquez said. “But this region, we were deep, deep in the hole.”
In May 2008, the region had a workforce of 125,374. In May 2014, that was reduced to 117,018, a loss of 8,357 jobs. Los Alamos lost 1,160 jobs during that period.
Vasquez delineated the steps REDI is taking to increase economic activity in Northern New Mexico, including partnering with Los Alamos National Security (LANS) to fund the Venture Accelerator Program, which awards no interest loans to regional businesses “with a demonstrated potential to grow and demonstrated need for capital to make it happen.”
Vasquez highlighted a number of small businesses that are expanding rapidly with help from the Accelerator program and other initiatives.
REDI also has programs in place to encourage business retention and expansion and has partially funded the 2020 Initiative to highlight and promote E-Base (economic base) businesses in effort to help them double in size or revenues by 2020.
An economic base job is one where the buyer for the service or the product is from outside New Mexico, infusing money into the local economy.
REDI also supported the legislature’s Interim Jobs Council, which has a goal of creating 160,000 E-Base jobs over 10 years.
Sullivan outlined Los Alamos’ current demographics, including its low unemployment rate of 3.1 percent.
Los Alamos National Laboratory employment in 2014 was 10,199.
Los Alamos County’s fastest growing industries in 2014 were general merchandising (15 percent), wholesale professional equipment and supplies (14 percent) and portfolio management (13 percent).
Retail leakage remains an issue in the county.
Sullivan outlined factors that will influence Los Alamos’ economic outlook. Those are:
LANL’s budget looks to be very similar next year to this year’s.
Smith’s Marketplace: “Preliminary data indicates the store is tracking at its projections since opening last July,” Sullivan said.
According to Sullivan, there are opportunities for a new development in town, as well as for redevelopment of older properties.
The county is expecting an influx of visitors once the Manhattan Project National Historical Park is launched, creating a demand for retail and hospitality venues. Council hears an update from the committee charged with investigating what types of preparations are needed to meet that influx at Tuesday’s work session, 7 p.m. at the White Rock Fire Station No. 3.
Sullivan expects a boost in winter tourism activities once Pajarito Mountain has snowmaking activities in place, which appears to be on track for next winter.
The county is working on new housing options, and is currently in negations with a developer for a segment of the A-19 site. “One of the best ways to grow the economy or the business sectors in a community is to grow rooftops or to add people to that economy,” Sullivan said.
There is a small but growing technology sector within the community.
The next Chamber Breakfast, on April 16, features New Mexico Secretary of Tourism Rebecca Latham.
Latham will be talking about how businesses in Los Alamos can work together to design New Mexico True commercials to promote tourist shopping in the community.