Expansion in the New Mexico economy continued to slow in the third quarter of 2001, according to a report released recently by the Bureau of Business and Economic Research at UNM.
The Jan. 14 report hints at a bleak economic future and a possible recession for the state, as large construction projects are finished and mining industries take a financial hit nationwide. And though the national economy is expected to begin recovery by the middle of the year, New Mexico won't follow suit for a while, says Larry Waldman, senior economist at the bureau.
Third quarter economic growth held at 1.7 percent in July and August, but fell to 1.2 percent in September, a reaction to the Sept. 11 attacks, according to the report. The brunt of the falloff in the wake of the attacks occurred in Albuquerque, where the September employment gain reached only 0.6 percent. The third quarter unemployment rate was 5.6 percent, up from 4.9 percent at the same time last year, according to the report.
"This sort of situation hasn't been seen since the last national recession," Waldman said. That national recession - which is when the gross domestic product suffers negative growth - occurred in the early 1990s.
"For one particular quarter during that recession, state employment growth fell to 0.9 percent. This is the lowest since then, and it will probably go lower than 0.9 in one quarter."
A recession for the state is possible, but not likely, he said. A state is considered to be in recession when it experiences negative employment growth. New Mexico hasn't seen conditions like that since the oil and mining busts of the mid-1980s, Waldman said.
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The mining sector remained the fastest growing sector in the third quarter, mostly driven by robust activity in oil and gas extraction. The services sector remained strong, adding more than 8,000 jobs during the last four quarters, a 3.2 percent increase.
Employment growth in the construction sector slowed to 1.2 percent in the third quarter, after averaging 4.5 percent from the fourth quarter of 2000 through the second quarter of 2001. Housing construction again showed strong growth, posting a 15.4 percent increase. Most of the action was in single-family units, which were up 23.1 percent. Nonagricultural employment growth slipped to 1.5 percent, down from 1.6 percent in the second quarter and 1.7 percent in the first quarter.
The manufacturing sector is again on the ropes, according to the report, with a 0.6 percent employment drop in the second quarter followed by a 2.7 percent decline in the third quarter. Difficulty in the high-tech quadrant is also apparent. Phillips Semiconductor laid off 250 workers this summer, with another 120 layoffs scheduled for the fourth quarter. Honeywell Power Systems closed last fall, and there have been workforce reductions at Goodrich Aerospace, Emcore, CVI Laser, and Roswell bus manufacturer NovaBus.
The outlook for the New Mexico Economy is moderate at best, Waldman says, though the state is "among the better of the bad" in comparison to the rest of the country. But, as consumer confidence rebounds, and international trade recovers, New Mexico may have already been dealt a heavy blow, Waldman said.
The state's recent $8 million revenue estimate - which has already sparked considerable "belt tightening" discussion - may be recast at a lower figure after a mid-legislative session revenue forecast next month, he said. Barring major economic news - since World War II, New Mexico's small economy has been largely dependent on large events, Waldman said - things will get worse before they get better.
Construction has been a major source of strength recently, according to the report, but with the completion of the Big-I and expansion projects at Intel, activity will wane and the construction sector will contract. Mining employment growth will also drop off sharply in 2002 before recovering slightly in 2003, according to the report. The weakness in mining is a result of sharply declining oil and natural gas prices, and layoffs in several mining operations in 2002. Metal mining employment dropped early last year when Phelps-Dodge laid off about 250 copper miners and smelter workers in Grant County due to adverse market conditions, including raw copper prices and a supply glut. Phelps-Dodge will lay off an additional 650 miners and smelter workers this month, according to the report. In addition, Molycorp Inc. plans to reduce its work force at the Questa mine by 102 workers early this year.
In the coal/nonmetals sector, the Pittsburg and Midway Coal Company has announced that the York Canyon mine near Raton will shut down this year, eliminating 140 jobs, while another 75 coal mining jobs will be cut at the San Juan Mine in Farmington, according to the report.
The Bureau of Business and Economic Research at UNM conducts economic and demographic research and analysis for the State of New Mexico. It also maintains a major depository of socioeconomic data - the Data Bank - for the state.
