Contact:

Larry Waldman, (505) 277-7077 Steve Carr, (505) 277-1821

January 14, 2002

ECONOMIC EXPANSION IN NEW MEXICO CONTINUES SLOWDOWN

Expansion in the New Mexico economy continued to slow in the third quarter of 2001 according to a report released recently by the Bureau of Business and Economic Research at the University of New Mexico.

Third quarter growth held at 1.7 percent in July and August, but fell to 1.2 percent in September, a reaction to the September 11 terrorist attacks. The brunt of the post-attack fall-off occurred in Albuquerque, where the September employment gain reached only 0.6 percent. Second quarter personal income growth was estimated at 4.9 percent. The third quarter unemployment rate, seasonally adjusted, was 5.6 percent, up from 4.9 percent a year earlier.

The mining sector remained the fastest growing sector in the third quarter, mostly on the strength of robust activity in oil and gas extraction. The services sector remained strong, adding more than 8,000 jobs (net) during the last four quarters, a 3.2 percent increase. In the construction sector, employment growth slowed to 1.2 percent in the third quarter, after averaging 4.5 percent from the fourth quarter in 200 through the second quarter in 2001. Housing construction again showed surprisingly strong growth, posting a 15.4 percent increase. Most of the action was in single-family units (up 23.1 percent). Nonagricultural employment growth slipped to 1.5 percent, down from 1.6 percent in the second quarter and 1.7 percent in the first quarter.

The manufacturing sector is again on the ropes, with a 0.6 percent employment drop in the second quarter followed by a 2.7 percent decline in the third quarter. The high-tech quadrant is also in difficulty. Philips Semiconductor laid off 250 workers this summer, with another 120 layoffs scheduled for the fourth quarter. Honeywell Power Systems closed last fall, and there have been workforce reductions at Goodrich Aerospace, Emcore, CVI Laser, and Roswell bus manufacturer NovaBus.

The outlook for the New Mexico economy is moderate at best, and the danger of recession is slight, although not impossible. Nonagricultural employment growth is expected to reach only 1.1 percent in 2002 before recovering to 1.7 percent in 2003.

Construction has been a major source of strength recently, but with the completion of the Big-I and Intel projects, construction activity will wane and the construction sector will slip into contraction mode. Mining employment growth will also drop off sharply in 2002 before recovering slightly in 2003. The weakness in mining is a result of sharply declining oil and natural gas prices, and layoffs in several mining operations in 2002. Metal mining employment dropped early last year when Phelps-Dodge laid off about 250 copper miners and smelter workers in Grant County due to adverse market conditions, including low copper prices and a supply glut. Phelps-Dodge will lay off an additional 650 miners and smelter workers this month. In addition, Molycorp Inc. plans to reduce its workforce at the Questa mine by 102 early this year, laying off 67 miners and 35 contract employees.

In the coal/nonmetals sector, the Pittsburg and Midway Coal Company has announced that the York Canyon mine near Raton will shut down this year, eliminating 140 jobs, while another 75 coal-mining jobs will be cut at the San Juan Mine in Farmington.

Further more information contact BBER Sr. Economist Larry Waldman at (505) 277-7077 or via e-mail at lwaldman@unm.edu.

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The University of New Mexico
Public Affairs Department
Hodgin Hall, 2nd floor
Albuquerque, NM 87131-0011
Telephone: (505) 277-5813
Fax: (505) 277-1981