LC Bulletin: Stockholders making money, others not so much

October 3, 2014. Retrieved online October 6, 2014 from Alta LeCompte, Las Cruces Bulletin

[Excerpts below reprinted with permission: Read the complete Las Cruces Bulletin article]

Jim Peach tells it like he sees it, while panelist and fellow New Mexico State University professor Christopher Erickson listens. (Las Cruces Bulletin photo by Alta LeCompte)

Jim Peach tells it like he sees it, while panelist and fellow New Mexico State University professor Christopher Erickson listens. (Las Cruces Bulletin photo by Alta LeCompte)

“Over the last year, the New Mexico economy can be easily compared with the New Mexico State football team,” economics professor Jim Peach said at the semi-annual KRWG-Greater Las Cruces Chamber of Commerce Economic Update Forum. “We’ve made a lot of progress, but we still have a long way to go.”

In 18 of 20 most recent quarters, real gross domestic product grew, Peach said. However, the 2 percent projected annual growth rate for 2014 is “well below our average.”

“The great recession was really horrible,” Peach said. “We lost 8 million jobs. By May of this year we finally got them back.”

Digging deeper, the economist uncovered both strengths and weaknesses in the economy’s ability to create jobs.

Growth slow in state

Erickson said New Mexico’s growth rate is “a modest one half of 1 percent.” Declining industries in July included construction and manufacturing, while natural resources and services did well.

The Las Cruces economy is growing by 1.5 percent.

“That growth is mainly driven by expansion at Fort Bliss,” he said. “El Paso is one of the metropolitan areas to receive the most increase in government employment in the past two years. Expansion at Fort Bliss is spilling over into Las Cruces.”

Erickson also touched on what he called the controversial and very divisive local issue of the minimum wage, commenting that City Council recently accepted the New Mexico Comunidades en Accion y de Fe’s (CAFé’s) proposal to raise the rate to $10.10 per hour by 2017. (See column on page B5.) “The evidence is that raising the minimum wage does not reduce employment,” he said. “That’s a surprise to a lot of people, including me.”

He said Las Cruces is 231st in economic growth among 381 metropolitan areas nationwide.

“When I came to Las Cruces 25 years ago, it was fifth from the bottom, so that’s an improvement.

“We live in an area that has very low incomes,” he said, adding that in 2013 the average annual income $27,000, or 53.1 percent of the national average.

Local poverty rate rises

Moderator Fred Martino said the New Mexico poverty rate of 22 percent actually rose in 2013, while the national rate of 16 percent went down.

He said the median household income of $44,000 is $8,000 below the national average.

“Median family income actually went down 5 percent from 2010 to 2013,” he said.

“Jobs that are being created as we move out of this very severe recession are an issue,” Erickson said. “The structure of the economy is changing.”

Erickson said that while New Mexico manufacturing has declined, its value added is up sharply as a result of an increase in productivity, which led to a decline in the demand for workers.

“Output per worker has skyrocketed, even if income for workers has not,” he said.

Commenting on the impact of international conditions, Peach said the Eurozone “is in the tank” and developing countries are not growing as much as expected. Meanwhile, political and military crises have multiplied.

Markets remain strong

For those fortunate enough to own stocks, Martin said he sees “nowhere near bubble conditions in any of the markets.”

He said using the Dow Jones Industrial Average as a benchmark he calculates a rise to 18,700 in the next six months.

“Overvalued markets can get more overvalued. (Of course, the flip side can happen, too.)” He said international tensions, including with ISIS, can threaten the world’s economies.

Martin said the best policy for individual investors is to have a diversified portfolio and stay the course.

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