1. University of New Mexico Bureau of Business and Economic Research Economic Stress: Impacts on Growth, Water and Land Use The New Mexico Water Dialogue January 11, 2013 Dr. Lee A. Reynis, Director lreynis@unm.edu UNIVERSITY OF NEW MEXICO BUREAU OF BUSINESS AND ECONOMIC RESEARCH 303 Girard Blvd. NE MSC06 3510 / Onate Hall Albuquerque, New Mexico 87131

2. It is official. NM population now over 2 million.

3. The Great Recession New Mexico Style…

4. New Mexico and the US: Nonfarm Employment Growth Over Previous Business Cycles and National Recessions % chg month over same month year ago, not seasonally adjusted

5. Composition of NM Payroll Employment, 2009 May be insulated from some effects, not others…

6. Many channels whereby NM affected by what happens elsewhere. This time, exports fell off, commodity prices plummeted, asset prices tumbled, capital investment dried up, access to credit cut off…

7. New Mexico has been slow on the up-tick, ranking close to the bottom among the states in job growth

8. The Great Recession has been distinguished by its depth, by its length, by the numbers of people affected, and by its breadth: Geographic…

9. Geographic spreading of the recession in New Mexico

10. Geographic spreading of the recovery… Year-over-year employment growth a year later, 2010 Q2

11. And by the severity of the Impacts across industrial sectors …

12. Growth in NM Wage & Salary Employment, 2000-08 UNM Bureau of Business and Economic Research Note: Figures for State & Professional & Business Services adjusted to reflect current ownership of Los Alamos National Laboratory. Source: NM Dept of Workforce Solutions, Bureau of Economic Analysis (military) Growth by industrial sector, before…

13. Source: FOR-UNM, Nov. 2010 in calendar 2009…

15. Source: NM Dept of Workforce Solutions estimated government employment; BBER estimates of private Q3 activity based on QCEW Latest estimates, 2010 Q3…

16. The Economic Forecast for New Mexico UNM Bureau of Business and Economic Research

17. Positive but subdued employment growth, 0.7% in 2011; 1.5% or less thereafter…

18. Among the MSAs, Las Cruces will grow the fastest…

20. New Mexico economy finally turning around, with positive year-over-year job growth imminent, if it hasn’t happened already. Growth is spreading geographically and by industrial sector. But unemployment rate still 8.5% (seasonallly adjusted) in Nov 10 and expected to be higher in 2011. Moreover, forecast indicates will take until end of 2014 – 6 years from the time NM employment peaked to realize that previous high. And when do, unemployment forecast to be 7.6% -- well above the 3.5% averaged in 2007. In terms of sectors…

21. Construction: Bottoming out then a tepid recovery…

23. National Enrichment Facility $1.4 billion UNM Bureau of Business and Economic Research

24. Mining and extractive industries… Run-up in oil & gas prices culminated in 2008 spike and August 2008 collapse. Oil prices have since recovered as have prices for some other commodities, but not natural gas.

25. Manufacturing, an important sector with a shrinking workforce… And an industry subject to considerable volatility UNM Bureau of Business and Economic Research Manufacturing…

26. Government – Federal Civilian & Military, State & Local LOS ALAMOS CONTRACTOR CHANGES

27. Removing the Safety Net NM Human Services Dept caseloads continue to rise, but ARRA funding to meet needs is about to end, as will the funding that has kept schools open and teachers working, that has helped people who lose their health insurance to continue to access needed services…

28. New Mexico Legislative Finance Committee, Consensus General Fund Revenue Estimates, Dec. 2010 Fiscal Dilemma: the State’s General Fund UNM Bureau of Business and Economic Research

29. The Problem: Jobless recovery. Lots of people unemployed, many for a long time; many underemployed. Many households have exhausted whatever savings had; many have lost their homes… Federal funding for safety net through ARRA almost gone. New federal stimulus: 2-year extension Bush tax cuts. State and local government revenues have tanked. Recovery likely to be slow.

30. Options for governments (which must submit a balanced budget): Draw down fund balances, reprogram capital outlay Borrow – but for operations?? Increase taxes Reduce tax expenditures (e.g., film tax credit) Cut expenditures (watchdog functions) Pursue “economic development” strategies to grow the economy, create jobs and income and an expanded tax base

31. What kind of economic development? What kind of jobs? For whom and with prospects for the future? Who benefits? And at what cost? Nature of subsidies required. One-time and continuing costs. Regulatory laxity, streamlining, roll-backs. Impacts on water resource. Water requirements, possibilities for re-use Potential for ground or surface water contamination. Precedents set.