The US and New Mexico Economies: Recent Developments and Outlook

Transcription

1 The US and New Mexico Economies: Recent Developments and Outlook March 2016 A presentation to New Mexico Bankers Association Presented by Jeffrey Mitchell, Director, UNM-BBER

2 National Economy: Review o Generally good despite strong global headwinds. o GDP growth driven by consumer spending, offsetting weak exports & government. o For 2015 the economy added million jobs, average of 235,000 per month. Unemployment rate to 5.0% by year end. o +172,000 jobs in January and +242,000 jobs in February 2016 ; Unemployment Rate 4.9%. o Wages only slowly responding to high employment growth. o Consumer Confidence Index higher in 2015 than any year since before the Great Recession. o Housing is still weak but slowly improving. o Recovering commodity & equity markets. o DJI now positive for the year & oil (WTI) above $40/barrel, up 50% since January 20 low ($26.50/barrel). 2

3 National Economy: Outlook o IHS Global Insight projects real GDP growth of 2.4% in 2016, 2.8% in 2017 and 2.6% in o Growth driven by consumption, residential & nonresidential fixed investment; however, net exports will still be a drag. o Employment growth still robust in 2016 at 1.8% before slowing in to about 1.0% per year. o Job growth strongest in professional & technical services, construction and healthcare. o Personal income growth only 3.9% in 2016 due largely to slow equity growth growth averages 4.9% per year as wages firm and equity growth evens out. o Oil price (WTI) averages $38.50/barrel in 2016, $46.78 in 2017 and $56.54 in o Housing construction slowly improves: up to 1.4 million starts in

4 New Mexico Review 4

5 New Mexico Economic Current Situation o Employment growth, slow since 2009 but stronger in FY2015 (1.4%), has again slowed (0.6% in 2015Q3 & 0.4% in 2015Q4). Weak start to o In FY2015, 64% (4,400 of 6,900) new jobs were in healthcare; 40% of these in social assistance and 60% outside metro areas. o Mining employment remained resilient for 3 quarters after price fall (June 2014-March 2015) but has begun to fall since. Rig counts continue to decline (102 at end-2014 to 18 last week). 5

6 New Mexico Economic Current Situation o Gross Receipts and early payroll collections surprisingly weak. Oil impact? o Unemployment rate rising to 6.8% (November, vs. 5.0% US) as with labor force, which declined every quarter from the recession through 2014, grew (>10,000 or 1.1% in 2015Q3). o Home sales improving (up 10% in Q3) and building permits beginning to respond, but values remain flat. A key indicator? o Mixed economic news for rural New Mexico increased water reserves, snow has had terrible and likely long-term impact on diary & cattle. 6

7 New Mexico Recent Economic Data* o January unemployment rate: 6.5% (US: 4.9%), down from 6.6% in December but up from 6.4% a year ago. o January employment up just 0.2% (vs. January 2015), a gain of just 1,700 jobs. o Mining (including Oil & Gas) lost 7,600 jobs (-26%). o Note: mining at end-2015 was still nearly 7,000 jobs (23%) above o Education & Health Services (mostly health) gained 8,300 jobs (+6.4%) o Albuquerque MSA gained 6,500 jobs (1.7%) in 2015Q4, rest of the state lost 4,000 jobs. *These numbers are preliminary and subject to revision. 7

8 Job Creation by Sector, 2015 Mining Construction Manufacturing Retail & Wholesale Trade Transp & Warehousing Information Financial Srvs Prof & Tech Srvs Mgt & Admin Srvs Healthcare & Educ. Srvs Leisure & Hospitality Government Local Government State Government Federal Government -2,000-1, ,000 2,000 3,000 4,000 5,000 8

9 Personal Income Growth and Medicaid Transfers $6,000 $5,000 $4,000 Medicaid Transfers (excl Medicaid) Personal Income (Excl Transfers) $3,000 $2,000 $1,000 $0 ($1,000) Q3 ($2,000) 9

10 New Mexico Unemployment Rate & Labor Force Participation Rate 10

11 Consumer Debt & Debt Burden (2015) 23.3% 23.7% 23.2% 23.8% 24.3% 22.3% 25.1% 24.2% 23.3% 11

12 Seriously Delinquent Mortgages (2014) 12

13 Oil & Gas and the NM Economy 13

14 Rig Counts in New Mexico vs. WTI Price Rigs (#) - Left WTI ($) - Left Employment ('000s) - Right Source: Bloomberg Business, Baker Hughes 14

15 How the decline in oil prices affects New Mexico s economy West Texas Intermediate (WTI): From $106/barrel in July 2014 to $40.69/barrel a few minutes ago (March 18). 1. Employment impact: lower investment in production, creating fewer jobs in the oil industry and through purchasing by companies and spending by workers. 2. Fiscal impact: reduces state and local government revenues, forcing budget cuts. 3. Consumer impact: lower gasoline prices mean more household spending on local goods & services. 15

16 Employment Growth by Geography, % 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -4.0% -5.0% New Mexico Albuquerque MSA Rest of New Mexico -6.0% 16

17 New Mexico Economic Outlook 17

18 New Mexico Economic Outlook: o Employment growth: below 1.0% this year, improving gradually to 1.2% or 10,250 jobs per year through o Composition of new jobs: 37% in health care & social assistance; 31% in low-wage service sectors; 13% in mining, utilities, construction, manufacturing, transportation; 12% in P&BS, 5% in government (tied to health) o Employment impact of low oil prices likely wear off by end the worst is behind us. o Income growth: 3.3% in 2016, rising to 5.1% in 2018; wages growth to private sector workers key variable. 18

19 Forecast Comparison: Employment Growth 2.0% 1.5% 1.0% 0.5% 0.0% % January 2016 October

20 Job Creation by Sector, 2016 Mining Construction Manufacturing Retail & Wholesale Trade Transp & Warehousing Information Financial Srvs Prof & Tech Srvs Mgt & Admin Srvs Healthcare & Educ. Srvs Leisure & Hospitality Government Local Government State Government Federal Government -3,000-2,000-1, ,000 2,000 3,000 4,000 5,000 20

21 Job Creation by Sector, Mining Construction Manufacturing Retail & Wholesale Trade Transp & Warehousing Information Financial Srvs Prof & Tech Srvs Mgt & Admin Srvs Healthcare & Educ. Srvs Leisure & Hospitality Government Local Government State Government Federal Government ,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 21

22 Western Blue Chip % 5% 5.4% 5.1% 5.3% 5.1% 4% 3% 4.2% 3.3% 2.7% 3.3% 2.6% 3.6% 2.9% 2% 1.7% 2.0% 1% 0.9% 0% US* New Mexico* Arizona Colorado Nevada Texas Utah Employment Personal Income * Source: US and NM forecasts from IHS Global Insight and BBER. Remaining forecasts are Western Blue Chip consensus forecasts. 22

23 Forecast Comparison: Income 8% 7% 6% 5% 4% 3% 2% 1% 0% -1% -2% $1.2 billion (2% of all income) due to Medicaid expansion alone January 2016 October

24 US & NM: Housing Starts & Permits Thousands, NM Millions, USA NM Housing Permits (Total) US Housing Start (Total) 24

25 New Mexico Job Gain/Loss by Region 25

26 Job Gain/Loss by Sector ( 000s) 26

27 New Mexico Employment Forecast, Alternative Scenarios 1.8% 1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% Baseline Scenario Pessimistic Scenario Optimistic Scenario 27

28 The US and New Mexico Economies: Recent Developments and Outlook March 2016 A presentation to New Mexico Bankers Association Presented by Jeffrey Mitchell, Director, UNM-BBER