Legislative Finance Committee learns about economic challenges related to the coronavirus
AZTEC — With the highest unemployment levels in state history as a backdrop, the Legislative Finance Committee kicked off its three-day-long meeting on July 15 with a presentation about reopening New Mexico.
They heard that the coronavirus pandemic will have lasting impacts on New Mexico's economy over the coming years, and the longer the pandemic-related restrictions continue the longer it will take to recover.
New Mexico began a phased reopening plan in June, but placed that on pause earlier this month as cases began to rise once again.
Legislators expressed concerns about not having advance warning prior to the changes the governor made in public health orders. Rep. Patricia Lundstrom, D-Gallup, said she learned about the changing requirements during the governor's press conferences.
This meeting was livestreamed on nmlegis.gov.
Expert: 'Some things are not reversible'
New Mexico State University Regents professor emeritus Jim Peach read a statement to the committee. He said society will not return to a pre-COVID economy. Peach served as a faculty member of the university's Department of Economics, Applied Statistics and International Business from 1980 to 2018.
"Some things are not reversible," he said. "The world will be different. Our lives will be different."
He warned that the legislators will face tough decisions during the 2021 session, which may mean draconian budget cuts or finding new revenue streams. He also warned that the oil industry remains volatile.
New Mexico saw 10% of people lose their jobs due to the coronavirus
“The economic crisis resulting from COVID-19 pandemic resulted in a loss of jobs greater and far more immediate than the job losses during the Great Recession,” said Alicia Keys, the cabinet secretary for the New Mexico Economic Development Department. “The last time we saw so few people employed was nearly 20 years ago when we had 240,000 fewer people in the state.”
The Great Recession lasted from summer 2007 until summer 2009. Keys said New Mexico reached pre-recession employment levels in November of 2018, more than a decade later.
The employment numbers were at 867,000 in February prior to the pandemic hitting the state. Those job numbers fell dramatically and in May there were 768,000 people working — a loss of nearly 10% of the jobs in New Mexico.
Keys said people have started to go back to work and unemployment is decreasing in New Mexico.
Different regions have been hit harder by the economic crises
The coronavirus pandemic and its related economic crisis have impacted different regions of the state at different levels.
Farmington, which is in a region hardest hit by COVID-19, will likely see a slower recovery than other parts of the state. However, that is not entirely due to coronavirus. San Juan County has been facing economic uncertainty, including potential job loss if the San Juan Generating Station closes in 2022.
Counties, like Taos, that rely heavily on tourism have been the hardest hit by the coronavirus. Taos County has 30% unemployment. Meanwhile, Los Alamos County — where the national laboratory is the largest employer — saw the least impact with only 2% unemployment. San Juan County is in the middle with 15% unemployment.
University of New Mexico Bureau of Business & Economic Research Director Jeffrey Mitchell cautioned that unemployment data often under-represents the true impact of the economic conditions. He explained that the unemployment data does not represent the people who have been reduced from full-time employment to only working a few days a week.
Conversely, Mitchell said the unemployment numbers will overstate the recovery for the same reasons.
Unemployment numbers greatly surpassed the past historic record. According to a Mitchell's presentation, the previous highest unemployment number in New Mexico was 9,000. As of the week of July 4, 95,000 New Mexicans had submitted unemployment insurance claims and more than 50,000 were on pandemic unemployment assistance.
People who did file and receive unemployment received a temporary bonus of $600 per week from the federal government. For some of those people, especially those who work in the food services and accommodations industries, that meant they were receiving more in unemployment than they had earned while working. But that is going to change soon, Keys said.
She said the average total benefits distributed to people on unemployment was $1,000 per week.
“To some extent, the people laid off in the greatest numbers were those making the lowest wages, impacting a really already very vulnerable population,” Keys said.
The extra $600 per week are going to expire at the end of the month and once that happens those people will experience a drop in money coming into their houses.
“That’s why it’s so important that we all strictly adhere to the COVID safe practices,” Keys said.
She said that will allow businesses to safely reopen and more people can return to work.
Projections show it will take years to recover for the coronavirus shutdown
Mitchell anticipates coronavirus will remain a significant economic factor through at least the end of the year. This will likely lead to fluctuations in businesses opening and closing.
He anticipates that half of the jobs will be recovered by the end of the year and the state will recover the 2019 employment numbers by mid-2024. The recovery will begin to speed up once a vaccine is developed and when the energy markets improve, which he anticipates will be in 2021. He does expect oil production will remain slow and will not reach 2019 levels until 2025.
However, while most of the state will reach 2019 employment levels by mid-2024, Farmington is not expected to recover at that pace. A graph in Mitchell’s presentation shows Farmington’s unemployment leveling off below 2019 levels in 2023. That is based on other factors outside of the coronavirus.
The longer the shutdown continues, the more likely it is that recovery will resemble what the state saw after the Great Recession — a rapid fall with a relatively gradual recovery.
Mitchell said the most important factor in the recovery is the federal response. If that does not come through, he said he would anticipate a much more pessimistic scenario.
In that pessimistic scenario, the state will continue to lag behind the 2019 employment levels at the end of 2025.
Pandemic could lead to widening income gaps
Mitchell also anticipates the coronavirus will have lasting impacts. He said some industries — such as technology — will do “quite well” while others — like retail — will suffer. He said this will lead to widening of income gaps.
This will also lead to increased need for social assistance programs.
“If we’re going to reopen our economy as much as possible while COVID still lives among us, we really need to limit our activities and go about our activities in a fundamentally-different way than we did in the past,” said John Bingaman, the chief of staff for the Office of Governor Michelle Lujan Grisham.
He said this means face coverings in public, staying home as much as possible, avoiding gatherings and practicing enhanced hygiene.
Bingaman said employees that can work remotely should be working from home rather than in the office spaces.
“We’re urging businesses ‘don’t bring people back into the workplace to congregate together just because you may be permitted to under the current version of the public health orders,’” he said.
Hannah Grover covers government for The Daily Times. She can be reached at 505-564-4652 or via email at firstname.lastname@example.org.
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