Albuquerque Business First
By Rachel Sapin, Reporter
PUBLISHED: Jan 12, 2017
The keynote speaker and panelists at Albuquerque Business First’s Grow New Mexico Economic Outlook event on Jan. 12 said this year’s economic outlook has plenty of positives, despite the nation being overdue for a recession, interest rates poised to rise and New Mexico dealing with a $69 million deficit for the current budget year.”The probability of a recession in the next six months is very low,” said national economist and keynote speaker Dr. Eugenio J. Alemán, director and senior economist
“The probability of a recession in the next six months is very low,” said national economist and keynote speaker Dr. Eugenio J. Alemán, director and senior economist of Wells Fargo Securities, at the Albuquerque Convention Center Thursday.
But they were equally frank about big challenges the nation and New Mexico face in 2017.Here are five takeaways from a lively discussion on economic expectations for the nation and New Mexico this year.
Here are five takeaways from a lively discussion on economic expectations for the nation and New Mexico this year.1. Interest rates will continue to rise
1. Interest rates will continue to riseAlemán said the number of hireable workers is dwindling as the nation approaches “full employment,” and businesses have increased wages and salaries to compete for workers. He said the Federal Reserve will likely increase its benchmark interest rate even more this year after increasing it for the first time since 2008 last year.
Alemán said the number of hireable workers is dwindling as the nation approaches “full employment,” and businesses have increased wages and salaries to compete for workers. He said the Federal Reserve will likely increase its benchmark interest rate even more this year after increasing it for the first time since 2008 last year.
2. Consumer confidence has improved dramatically since the election
“My conclusion is people are really happy that Trump won,” said Alemán. “The consumer confidence index jumped to 113.7 in December . That’s the highest number since the early 2000s.” He said 2017 will also see continued good news for home sales nationally, particularly for housing starts, with 1.2 million potential new homeowners for the year and existing home sales remaining strong.
3. There is no recession on the horizon, yet
We are well into the economic cycle where the U.S. would typically be due for a recession (every seven years). But Alemán said consumer and market confidence has surged since the election. That enthusiasm paired with stable employment and strong growth in household disposable income should buoy national economic growth to 2.1 percent this year from 1.6 percent last year. But Aleman said a potential trade war with other countries could impact those growth prospects, because the U.S. economy is heavily reliant on global consumer trade for its economic health. He said trade wars do not necessarily cause depressions, but they can cause inflation. He said President Elect Donald Trump should tread carefully when it comes to trade agreements with Mexico. “Manufacturing in the U.S. and Mexico go in tandem,” he said. “If you affect Mexican manufacturing, you’re affecting several production processes in U.S. That is going to bring down the U.S. also.”
4. New Mexico’s energy industry will see growth in oil, natural gas and renewables, but challenges too
Panelist Alexis J. Street, who manages state government affairs for Chevron in Santa Fe, said OPEC production cuts are good news for New Mexico. “New Mexico has an incredible energy story and incredible momentum. Right now, we’re 7th in the nation for crude and natural gas production,” Street said. She said Chevron planned to triple production in the Permian Basin by 2020. She said the incoming administration’s actions on federal subsidies that support wind and solar are a concern for the energy industry this year. “If we decide to end that tax credit, wind may face challenges of being cost-competitive against other types of energy production,” she said.
5. What New Mexico can do to grow its population and increase its economic standing
“Prioritize education and infrastructure investment. They are critical components of our foundation as a state.” – Alexis Street
“Being able to be competitive with our wages [in New Mexico] is another challenge.” -Jose Garcia, general manager, Albuquerque Convention Center
“Create certainty around great tax benefits that puts us on par with other states. With the LEDA fund or JTIP, we need to keep investments in those programs.” -Jami Grindatto, president and CEO, Sandoval Economic Alliance
“Fostering competition in health care will slow inflationary growth.” -Dr. Martin Hickey, CEO, New Mexico Health Connections
Nearly 300 people attended the Grow New Mexico Economic Outlook event. Sponsors were Wells Fargo, the city of Albuquerque and Jaynes Corp.