Columns appear here a week after they're sent to newspaper subscribers.
© 2020 NEW MEXICO NEWS SERVICES 7/27/20
State’s businesses try to plan for the ‘next normal’
By Sherry Robinson
All She Wrote
My niece lost her job as an office manager because, with all her co-workers laboring at home, there is no office to manage.
The virus, we know, is reshaping how and where we work. A few visionaries are looking beyond.
"The world has changed. It’ll never be the same,” said Albuquerque businessman Dale Dekker. “There will be a next normal.”
In a webinar last week for the business group Economic Forum, Dekker asked and answered the question: Is New Mexico at a tipping point? Is the change and disruption – the spreading pandemic and crash of oil prices – enough to launch us into real change?
Dekker heads a 61-year-old architectural firm. Enlarging the pie benefits his company, but from writing about him in the past I know he loves New Mexico, thinks deeply about how to make it better, and has given time, money and office space to make that happen.
He started his talk with New Mexico’s negatives. We know what those are, but one we don’t usually think of is this: Arizona has half the regulatory verbiage, and presumably half the regulations, that New Mexico does.
“It piles on to the cost of doing business,” he said. It’s important because the only way for the state to grow in the future is to grow the private sector.
From a business perspective, the positives are: low cost of living, low property taxes, strong economic development incentives (we’re 10th nationally), no inventory tax, good workforce training capability in our community colleges (we’re 7th), a thriving innovative culture, and a solid foundation in labs and universities.
While everybody likes the weather, outside companies should know that we have few natural disasters, and weather rarely interferes with productivity.
The future will be in robotics, artificial intelligence, 3-D printing, internet of things, smart sensors, and adaptations to climate change. This, he said, is the Industrial Revolution 4.0. All these sectors are accelerating, and they will need a new workforce.
What trends has the virus wrought? The biggest is probably the “reshoring” of U. S. companies now that the nation has realized its overdependence on Chinese manufacturing. Companies moving operations back from China have so far favored the two coasts, where they risk weather-related interruptions.
Other companies will invest in warehouse space and bigger inventories, having discovered the weaknesses in the supply chain.
Remote work will increase. As employees discover that they don’t have to live in a congested, high-priced city, they will relocate. Realtors already report an uptick in home sales to people from California and New York.
The second major trend is “near-shoring.” Mexico will be the next manufacturing superpower. Mexico already offers tax breaks, wage stability, operating simplicity, shorter shipping times, and intellectual property protection.
“This is a huge opportunity for the state,” Dekker said. New Mexico not only has excellent access but already enjoys something like $81 billion in trade flowing back and forth through our ports of entry.
Third among trends will be “green-shoring,” borne by climate change and the oil bust. New Mexico has the lowest cost renewable energy – lower, in fact, than the states around us. Renewable energy can become a taxable export commodity and be harnessed for use in New Mexico. Oil and gas will still be part of the state’s portfolio, Dekker said, but we can’t be dependent on it.
Getting there will mean massive retraining, a business friendly environment, and a bi-national economic development strategy with the state of Chihuahua. Public and private sectors must work together, and they must work quickly.
“Something we don’t do well in New Mexico is change,” Dekker said. “If we don’t, we’ll be left behind again. We have to think differently about the future.”
Sherry Robinson photo
© 2020 NEW MEXICO NEWS SERVICES 7/27/20
We will not return to a pre-COVID economy
By Harold Morgan
New Mexico Progress
Committees of the Legislature like to travel during the summer. Moving meetings around during the interim (between sessions) officially allows legislators to become acquainted with the state’s quite different regions.
For the locals, it means talking to legislators without the expense of a trip to Santa Fe, a nice side effect when times are tight. The time required further reduces the nonsensical myth of a “part-time” legislature.
Community attractions are nice, too. Artesia may have the coolest downtown of the state’s small cities. And an outdoor dinner on a balcony in Taos Ski Valley is a time to be cherished.
Summer is the time for new concepts, visiting informally with legislators and putting potential statutory flesh on ideas.
These attractions help offset the environment when the news is uniformly bad, as it was
At the start of the Legislative Finance Committee’s semi-virtual Cloudcroft meeting last week.
The news: The economic disasters from the COVID-19 virus and the oil collapse mean that the state faces a lost five years.
Concepts and numbers came from retired New Mexico State University economics professor Jim Peach. The forecast and more numbers were from Jeffrey Mitchell, director of UNM’s Bureau of Business and Economic Research, which operates an economic model that is a key part of state government’s revenue forecasting.
The questions and comments from legislators, some in the room, some not, had a theme—more information, quickly, about daily developments. Simply watching the governor’s weekly news conference isn’t adequate. Sen. George Muñoz, Gallup Democrat, said legislators need faster information “so we can be prepared when our constituents call us.” Constituents stop them in the grocery to ask what’s happening. Muñoz also cited another theme of some legislators—cutting government.
“A common question I get,” Peach said, speaking from Las Cruces, is when are we going to return to the pre-COVID economy. “We’re not going to recover” during 2020 and 2021 was his starting response, “The simple answer is that we cannot and will not return to a pre-COVID economy. The world will be different. Our lives will be different.” The effects will be as profound as past huge crises—World War II or 9/11.
The oil and gas industry will not get to the previous employment levels, if only because productivity improvements mean producing hydro-carbons with far fewer people. As compared to 2014, Peach said, in 2019, “the state produced 2.7 times as much oil with a few more rigs and slightly fewer jobs.”
Oil production will remain well under 2019 levels through the end of 2025.
Of the big general job sectors, leisure and hospitality has taken the biggest hit with 24,981 unemployment claims registered, 20 percent of the total. This sector contains the restaurants we’ve heard so much about, plus hotels and other businesses central to tourism. Health and private educational services is next with 15 percent of the claims, followed by retail with 12 percent. Mitchell listed a number of reasons behind the uncertainty of the unemployment numbers including not counting the self-employed.
Overall, retail has been weak for ten years, Peach said.
Albuquerque should achieve 2019 job levels by the end of 2024. The state will hit that level in 2023. It’s bleak for Farmington, which is expected to flatline at 94.5% of the 2019 employment. Income gaps will widen, Mitchell said, requiring in turn more healthcare and social assistance.
Peach mentioned that education is a huge part of the economy.
A legislator asked Peach, “Why aren’t we figuring out how to cut spending?” Peach’s response, “State expenditures will have increased.” Education is one example. The next session will have to see new income streams or spending “drastically cut.”