LC Bulletin: State economy sputters

March 8, 2013. Retrieved online March 11, 2013 from Alta LeCompte, Las Cruces Bulletin

Job growth in U.S. trails previous decade

Economists Eugenio Alemán of Wells Fargo and Jim Peach of the New Mexico University College of Business told the Economic Outlook forum at NMSU, the economy should continue to grow at the tepid rate of 1 1/2 percent at least through 2013.

At the second annual event Feb. 21 pairing the two experts, Alemán gave the national outlook, while Peach focused on the state economy.

Peach said the New Mexico economy has “flatlined.”

“We lost nearly 3,000 jobs statewide in 2012,” he said. “Education and health are the only sectors growing. In 2012, the rate of increase dropped considerably.”

On a more optimistic note, he said there are some indications the housing sector in Albuquerque may be showing signs of recovery.”

New Mexico wastes a lot of time arguing about the corporate tax rate, Peach asserted.

“I wish we’d get rid of it altogether,” he said. “It accounts for only 4 to 5 percent of state revenue.”

Although he declared the corporate tax insignificant, he said the state’s personal income as a percentage of U.S. personal income is a real and chronic [issue] that must be addressed.

He expressed concern that 25 percent of New Mexico employment is with government.

“It is actually a lot larger because a lot of people work for companies under direct contact to government agencies. The government is not likely to lead us out of recession in New Mexico. In fact, things could get pretty nasty,” he said referring to the possible impact of anticipated government cuts on the state economy.

Federal dollars officially make up 12.8 percent of state GDP, he said, but the percentage rises to 36 percent if direct payments to individual are included.

Alemán said the overall potential negative consequences of sequestration have been overestimated, as they are only 2.5 percent of government spending. The problem, he said, is the impact of sequestration is “not the same for all states.”

Assessing the current state of the U.S. economy, Alemán said the growth rate is half what it was in the previous decade.

“We will still experience growth at the rate of 1 1/2 percent in 2013 as we did in 2012,” he said. “It takes the economy five years to recover the level of job loss we experienced. We have recovered 6 of the 9 million jobs we lost. We haven’t recovered the rest of the 9 million because the number of state and local government jobs has dropped.”

He said every sector except government has experienced growth in the recovery to date.

Alemán noted only 13 percent of U.S. government employment is federal, while the states employs 23 percent of government workers and localities 64 percent. “The biggest issue in the economy today is the economy is having trouble hiring workers,” he said, “3.7 percent is the unemployment for college graduates. If you want a job, you can get a job. Of course, you might have to go to North Dakota and you might have to have an engineering degree.”

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