City makes modest job gain despite the downturn economy
Article courtesy of the Las Cruces Bulletin
By Gabriel Vasquez
Leaving Las Cruces, the economy goes from bad to worse.
That was the message delivered by three economics professors at New Mexico State University during a televised economic update forum organized by the Greater Las Cruces Chamber of Commerce Wednesday, Aug. 11, at KRWG-TV studios.
“As you go from local, to state and to the national (economy), it gets worse,” said NMSU economics professor Chris Erickson. “The bad news is that we have a weak economy, the good news is that it could be a lot worse and we’re not as bad as the average for the nation.”
After 12 consecutive months of job loss, Las Cruces made modest employment gain in May and June, the latest numbers available, Erickson said.
The Las Cruces economy bottomed out in September 2009, after which it gradually decreased its negative employment growth for seven months before finally adding jobs.
“We’re in the process of recovery at this point,” Erickson said. “The fact we’re gaining jobs in Las Cruces is good news.”
And paradoxically, New Mexico has experienced growth in personal income during the recession, despite the decline in employment.
“That includes pay raises, profits and payments from the federal government,” Erickson said. “We continue to see weak, but positive growth in that area.”
Las Cruces’ southern New Mexico neighbors – Grant, Lincoln, Luna, and Otero counties – remain in the red, with negative employment growth since June 2009. The hardest hit is Grant County, whose employment rate dipped 6.2 percent in one year, mostly driven by problems in the mining industry which will not likely recover, Erickson said.
Nationally, the unemployment rate held steady at 9.5 percent in July and lost 131,000 jobs despite earlier job gains this year. Private industry gained 71,000 jobs during that month, but 143,000 government jobs were eliminated as the U.S. Census wrapped up its decennial count, according to statistics from the U.S. Bureau of Labor Statistics.
“For the first few months of this year we had some rather good gains in employment, but the last two months have been in decline again,” said NMSU economics professor Jim Peach. “We are looking at something like 2014 before we will once again have the number of jobs we were having before the beginning of the recession.”
The cause of the recession, the national housing market, remains sluggish.
“We have not yet recovered,” Peach said. “On housing prices, we’re a little bit up from where we were a year ago but still way behind. If you look at housing starts and new houses sold, those numbers are not very encouraging.”
Peach predicted an increase in foreclosures for the remainder of the year.
“Housing is simply not fixed,” he said.
The credit market is just as bad, if not worse, as banks continue to pad their reserves and limit lending opportunities.
“Traditionally, banks, collectively in the U.S., would have $3, $4 or $5 billion in excess reserves,” Peach said. “Since late 2008, we’ve been at nearly $1 trillion dollars in excess reserves … 250 times what we normally have in the banking system.”
NMSU business professor Ken Martin said the stock market has experienced turbulent highs and lows since April, largely brought on by the Greek sovereign debt crisis and the May 6 “flash crash.”
“Investors thought Greece was going to default on its debt,” Martin said. “Since then, the European Central Bank stepped in with a rescue plan led by Germany.
“European banks underwent a stress test and most banks passed with flying colors. This went a long way to stabilizing those markets.”
The May 6 flash crash involved U.S. corporate stocks and was followed by an immediate rebound that recorded the second largest point swing in history and the largest one-day point decline, according to the Dow Jones.
“Liquidity evaporated from high-frequency traders and some stocks lost a tremendous amount of value,” Martin said. “This had the effect of really scaring off a lot of individual investors.”
Erickson said the local economy will continue to outperform its neighbors, as well as the state and national economy because of its diverse base of employment and the recent influx of troops from Fort Bliss.
“We have the advantage of having Fort Bliss in our backyard,” he said. “The very rapid increase in troop levels at Fort Bliss has resulted in a pretty major stimulus to the Paso del Norte region, which includes Las Cruces.”
Erickson said the military base has added at least 1 percent to local economic growth the past five years.
Peach offered a long-term solution to resume economic growth and increase job growth at a faster pace.
“I think we need to do an awful lot on infrastructure and transportation,” he said. “We need massive public works projects such as the interstate highway system proposed by Eisenhower in the ’50s.
“We need bold programs that will spur technological advancement and employment growth.”
