Improving outlook
Experts are expecting at least small upticks in several key sectors of NM's economy as slight signs of optimism crop up
For years, the co-owner of Jubilation Wine & Spirits has observed something about her clientele. When the state’s economy is improving, her older customers are more likely to buy new brands of alcoholic beverages. When the economy is on the decline, they stick with the tried-and-true.
According to the Jubilation Index, 2018 is likely to bring a New Mexican economy on the upswing.
“The older crowd is definitely experimenting more than they were last year, buying wine with names like ‘cherry pie,’” said Tasha Zonski-Armijo. “Things are looking good.”
Economic experts share some of that optimism, predicting at least small upticks for several key indicators. But will the coming year be “cherry pie” good in New Mexico?
‘Always variable’
Despite efforts to diversify, much of the state’s economy is still dependent on the mining industry, which includes oil drilling. New Mexico State University economist Jim Peach said he expects oil prices to stay in the range of $50 to $60 a barrel for the calendar year. That range is far from 2008’s high of $145 a barrel, but a marked improvement from below $30 a barrel in 2016, the lowest price in over a decade.
"It's quite an improvement from where we've been,” Peach said. "We're probably not headed toward $70, but the good news is that we’re probably not headed toward $40 either".
Peach warned that any number of circumstances could quickly change that outlook: the volatile political situations in Iran and Venezuela, to name just two.
"The thing we can always be assured of is that oil is always variable," he said.
Peach also noted that any recovery of the oil industry is unlikely to lead to the kind of employment growth in that sector seen in years past. Why? Technology: New rigs are highly automated, he said, and there are fewer of them now than in years past.
Health care strong, but slowing
If you’re a physical therapy assistant, 2018 will probably bring sound employment prospects. That’s less likely if you’re a grader of agricultural products.
University of New Mexico’s Bureau of Business & Economic Research predicts that the health care and social assistance industries will be the state’s primary drivers of job creation into 2020, despite the fact that economists there say the state has mostly absorbed the impact of Medicaid expansion under the Affordable Care Act.
Those conclusions are largely reflected by the New Mexico Department of Workforce Solutions, which predicts that the health care support and personal care/service sectors will see “exceptional growth” through 2024. Among the fastest-growing jobs in these areas: home health aides, physical therapist assistants, phlebotomists and child-care workers.
Peach said one of the reasons why health care employment is still doing well in New Mexico is because of the state’s aging population. But he said he doubted the industry would continue to see the type of development it experienced during Medicaid expansion.
Other sectors likely to see strong growth according to Workforce Solutions are construction, professional/technical services, and accommodations/food services. At the bottom of the list are farming/fishing/forestry occupations, which are likely to see zero to declining growth. Farm workers and graders of agricultural products appear to have particularly bleak prospects.
Overall, BBER forecasts a relatively small employment increase in 2018 of only 6,900 jobs or a growth rate of 0.9 percent, and income growth at a weak 2.7 percent.
Peach said he agreed with BBER’s predictions.
“It’s not going to be a giant boom,” he said.
Construction stabilizing
New Mexico’s unseasonably warm temperatures this winter has had at least one clear beneficiary: the construction industry. John Garcia, executive vice president of the Home Builders Association of Central New Mexico, said the weather helped builders throughout the state have a stronger fourth quarter, and he expects the industry to continue stabilizing and see at least some growth through 2018.
“Builder confidence and consumer confidence is higher than it has been recently,” he said. “Multi-family and commercial are okay, but with single-family we’re predicting a good year.”
It’s positive news for an industry that has struggled to rebound from the recession and was seeing flat or disappointing permit numbers as recently as last summer. But Garcia said that appears to be changing, in part because the state is slowly attracting more retirees who are interested in building or buying homes here.
Industry’s recovery has created a new challenge for builders as well: a tighter labor market. Garcia said the Facebook data center in Los Lunas, which has as many as 1,000 workers a day on site contributing to a $1 billion project, has made it difficult for some builders to find tradesmen like plumbers and electricians.
But he also said projects like Facebook are essential for attracting and retaining a key element to the state’s future economic success: millennials. And to do that, said Garcia, New Mexico will have to entice several more large employers to open their doors in New Mexico.
“It’s starting to come together, but we really need another shot in the arm,” he said.