BBER Data Users Conference November 2017

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New Mexico’s Economy:Current Situation and OutlookBBER Data Users ConferenceNovember 2017

DATA DASHBOARDS WHAT IS IT A web-based data visualizationand communication tool A subscription service HOW ITS USED Used to communicatecomplicated data Used to keep those anorganization serves informedHOUSING WHAT YOU GET Customized package tosubscribers needs Visual digital graphics Constant maintenance andupdates Customized databaseEDUCATION

FOR-UNM WHAT IS IT A tool for decision makersin the public sector A subscription service HOW ITS USED Used to understandeconomic trends Nationallyand Locally Used to guide futuredecision making andbudget planning processesEMPLOYMENT GROWTH WHAT YOU GET Quarterly EconomicForecasts, Analysis of US,NM and Regionaleconomies, QuarterlyForecast MeetingsMIGRATION

RESEARCH BBER has the expertise tounderstand the big pictureeconomic indicators and trendsBBER can apply this big pictureknowledge to smaller morefocused topics BBER offers tailored anddetailed research to individualcities, towns, counties andorganizations

Job Growth, 2011-2016Source: US Bureau of Labor Statistics, CES

State to State Migration, 2011-2015Number leavingfor 100 entering 6363-8081-110111-149150 New Mexiconet migration(-42,000)Source: US Census Bureau

State to State Migration, 2005-2010Number leavingfor 100 entering 6363-8081-110111-149150 New Mexiconet migration39,500Source: US Census Bureau

No easy answers,but several observations.

Out-migration from NM beyond our neighbors.2005-2010( 39,500)Number who leave NMper 100 who enter NMSource: US Census Bureau 6363-8081-110111-149150 2011-2016(-42,000)

Out-migration of young families and seniors,while older working age population 0)(14,000)(16,000)1(9,330)(156)(9,288)(13,938)1 to 17 years18 to 29 years30 to 44 years45 to 64 years65 years and overSource: US Census Bureau(9,271)

Out-migration of Associate’s & Bachelor’s Degrees (25 y/o )(16,000)(20,000)(16,947)Less than high school graduateHigh school graduate (includes equivalency)Some college or associate's degreeBachelor's degreeGraduate or professional degreeSource: US Census Bureau

New Mexico has lost its early advantagein higher education.-4 (9.8%)9 (12.7%)5101516 (17.6%)13 (7.1%)21 (20.4%)202525 (23.5%)21 (4.5%)3035 (25.0%)354039 (27.2%)4519401950Source: US Census Bureau1960197019801990200020102016

Professional jobs have driven job growth.Recent losses in oil state more than offset earlier gains.Job growth----------47Prof & Business Svrs (%/Jobs)46%0.00148Financial Services (%/Jobs)41%0.00345Government (%/Jobs)-40%0.0043Mining (%/Jobs)-37%0.0086Data for September 2010 – September 2017Sources: Bureau of Labor Statistics, CES.Analysis by BBER.

Professional & Business Serviceshas driven US job growth, but NM ranks 48thSource: US Bureau of Labor Statistics, CES

Wages have neither driven nor followed job growth.Young, large working age population are important.Job growth----------NewMexico'sRank47Wages, Average Weekly15%0.30143Age 24-44 y/o (%/population)45%0.00135Median Age-33%0.01834Correlation Significance(R)(P)Data for 2016.Sources: US Census Bureau; BLS.Analysis by BBER.

Tax rates are not correlated with job growth.Correlation Significance(R)(P)Job growth----------NewMexico'sRank471 Lowest RateTotal Taxes (% Income)-1%0.93814Property Taxes-37%0.0081Sales Taxes (GRT)21%0.14942Income Taxes1%0.4135Corporate Taxes-6%0.68325Government debt-9%0.54926Sources: Tax Foundation, 2017 Report.Analysis by BBER.

New Mexico does NOT lag in startups.Expansions lag ingsContractionSource: BLS, Business Employment Dynamics; BBERExpansionsOpenings

New Mexico & Neighbors – Selected StatisticsJob growth (2010-2017 %/yr)RankProf & Business Srvs (%/yr)RankState & Local Taxes (% Income)RankPopulation 25-44 y/oRankBachelor's Degree (% 25 y/o )RankHousing Costs (Median Monthly)RankHousing Costs (% Income)RankMigration (Out / In)Source: BLS; US Census 7.2%39 7803922.7%21114%2.1%133.0%218.8%1525.9%2228.9%30 9522223.0%1783%2.4%83.1%1911.0%4728.2%232.9%14 1,419427.3%2119%2.6%33.3%138.9%1728.5%139.9%2 1,1561222.7%2180%2.6%44.5%38.1%827.9%623.5%45 1,0451824.4%1183%OKTXUT1.0% 2.5% 3.2%37510.9% 4.0% 4.9%47518.6% 7.6% 9.6%1163025.9% 28.1% 28.1%223325.2% 28.9% 32.6%432917 744 937 1,04943241720.5% 21.7% 22.8%43332088%79%90%

Current Economic Situation

Current Economic Situationo For most of post-recession, the state’s economicnarrative has been driven by ‘external factors’ – oilboom & bust, Obamacare, even Intel job losses anduncertainty at national labs.o In recent months, the state’s economic narrative isless about external factors – oil prices andproduction are relatively stable, the economic gainsdue to Obamacare are absorbed (and now the stateis beginning to pay its share).o Where does the state go on its own?

New Mexico Economic Current Situationo NM lost 537 jobs (-0.1%) in 2017Q1 after a loss of 2,500 (0.3%), first loss in two consecutive quarters since 2010.o BBER estimates 1,250 jobs (0.2%) in 2017Q2 and Q3.o Changing pattern– in 2017Q1 mining -1,390 jobs, healthcare 1,480 (in 2016, mining -5,700 jobs and healthcare 4,625jobs).o Improvement in Business & Prof. Services – 3.8% job growth in2017Q1 (QCEW); 3.0% in 2017Q3 (CES).o Public finances are much improved from a year ago – GrossReceipts tax collections up 12% in 2017Q2; oil prices &production up.

Gain/Loss in General Fund Accruals, January-MayMillions ( 50) 0 50 100 150Gross ReceiptsCompensating TaxSelective Sales *Personal Income TaxCorporate Income TaxOil & Gas Revenues *License FeesInvestment IncomeTribal Revenue SharingMiscellaneous ReceiptsReversionsSource: NM Legislative Finance CommitteeNet 254 million 200

Gross Receipts & Taxes by County: 2017Q2 vs. 2016Q2Gross TaxesGross ReceiptsBERNALILLOLEAEDDYVALENCIATORRANCESANTA FEUNCLASSIFIEDSAN JUANBernalilloLeaEddyLos AlamosRemaining CountiesNet 106 million,12%ValenciaChavesTorranceLunaSan MiguelCurrySanta FeTaosColfaxCibolaRio ArribaOteroSan JuanOther 17 CosQUAYDONA ANAROOSEVELTSAN MIGUELLINCOLNTAOSRIO ARRIBACHAVESOTERO(150,000)Net 1.8 billion6.8%150,000450,000750,000Source: NM Taxation & Revenue Department, RP-80s(15,000)015,000 30,000

Gross Receipts & Taxes by County: 2017Q2 vs. 2016Q2Gross TaxesGross ionWholesaleReal EstateOther ServicesProfession & TechHealthcareFinance & InsuranceHospitalityAdminitrative ServicesInformationAgricultureArts, Entertainment, Public AdministrationPrivate Education SrvsMgt of CompaniesUtilitiesConstructionProfession & TechMiningHealthcareOther ServicesWholesaleReal EstateUtilitiesHospitalityFinance & InsuranceRetailMgt of CompaniesAdminitrative ServicesManufacturingTransportationPrivate Education SrvsPublic AdministrationArts, Entertainment, AgricultureUnclassifiedNet 1.8billion6.8%- 100,000,000Net 106 million,12% 900,000,000Source: NM Taxation & Revenue Department, RP-80s- 50,000,000 0 50,000,000

300120250100200801506010040502000Oil Production IndexDrill Rigs (Right)Source: EIA, Baker Hughes, ONGARD, IHS Global InsightWTI Price (Right)Drill Rigs & WTI Price/BarrelProduction IndexOil Rigs, Production and Price

1,8006.0% 1,5005.0% 1,2004.0% 9003.0% 6002.0% 3001.0% 00.0%- 300-1.0%- 600-2.0%Increase in Medicaid Transfers - LeftSource: BBER FOR-UNM, July 2017Healthcare job growth -- Right%Millions Medicaid Transfer Payments andHealthcare Job Growth

2017Q3 Housing Sales by Region and Building o CoSanta Fe CoDona Ana CoOil PatchOtherPermitsSource: NM Realtors Association; BBER20162017San Juan Co

New Mexico Economic Outlook

New Mexico Economic Outlook: 2018-2022o Weaker near term forecast due to disappointing 2017Q1 QCEWemployment data slow single family housing construction,and weaker IHS Global Insight forecast, especially for incomes.o Jobs forecast gain 4,500 (0.6%) jobs in 2017Q4, closing the year 1,750 jobs (0.2%).o Jobs forecast gain 6,900 jobs (0.9%) 2018, and 8,725/yr (1.1%) in2019-2022.o Weak income growth – 2.7% in 2018, average 4.2% in 2019-2022.o Oil production to increase gradually, given slightly weaker priceoutlook.o Impacts of pessimistic (20%) greater than optimistic (15%)scenario.

Employment Growth: History and 016October 2017Source: BBER FOR-UNM, October & July 201720172018July 2017201920202021

Job Creation by Sector, 2018-2020MiningConstructionManufacturingWholesale TradeRetail TradeTransport. & Warehsng.InformationFinance & InsuranceReal Estate & LeasingProf.& Tech. Svs.Admin. & Waste Mgmt.Educ. Svs.Healthcare & Soc. Asst.Arts & RecreationAccom. & Food Svs.Local Govt.State Govt.Fed. Govt.(1,000)01,000Source: BBER FOR-UNM, October 20172,0003,0004,0005,0006,0007,0008,0009,000

Personal Income: History and 52016October 2017Source: BBER FOR-UNM, October & July 201720172018July 2017201920202021

Forecast Job Growth by Region, 4,000)20172018AlbuquerqueSource: BBER FOR-UNM, October 20172019Farmington2020Las Cruces2021Santa Fe2022Non-Metro

New Mexico Employment Forecast,Alternative Scenarios2.0%1.5%1.0%0.5%0.0%-0.5%20152016Baseline ScenarioSource: BBER FOR-UNM, October 2017201720182019Pessimistic Scenario20202021Optimistic Scenario

Concluding Commentso Absent external factors (oil, Obamacare, etc.) NM’s economyhas moved sideways, lacking an internal driver.o NM has missed the professional services-based economicrecovery; out-migration of college-educated labor force is acause and an effect.o Near-term is better than recent past – modest recovery of oilwill continue to support state finances.o To avoid continued boom and bust, leadership must take thelong view.o Principal economic challenges are education and stabilizationof public finances (Gross receipts, Rainy Day fund).

BBER Provides New Mexico –o Economic forecasts and analysiso Customized data access and visualization toolso Contract [email protected]@UNMBBERJEFF MITCHELLDirectorJENNIFER [email protected]

New Mexico Leadership

New Mexico Economic Current Situation o NM lost 537 jobs (-0.1%) in 2017Q1 after a loss of 2,500 (-0.3%), first loss in two consecutive quarters since 2010. o BBER estimates 1,250 jobs (0.2%) in 2017Q2 and Q3. o Changing pattern–in 2017Q1 mining -1,390 jobs, healthcare 1,480 (in 2016, mining -5,700 jobs and healthcare 4,625 jobs).