The New Mexico economy has has been a blog specialty the past two decades so a survey from the Harvard Kennedy School grabbed our attention. It's titled New Mexico's Economy Over Time and Space. The report offers interesting insights on the state's challenges, many of which have been explored here. excerpts from the report:

THE BEGINNING--Slowdowns and uneven growth meant that New Mexico never attracted people in the way that Arizona, Colorado, or Utah did. Recent population growth has been the slowest in the last 120 years, indicating important economic problems that have made people “vote with their feet.”. . New Mexico missed early waves of manufacturing that benefited other states. This likely indicates a limit on how much manufacturing growth is possible, as the state has fewer capabilities. . .Mining, including the extraction of oil and gas, grew to be a critical part of the economy and government revenues, but never accounted for more than 10% of jobs. Government activity also grew to be a large part of the state economy because of both state and federal funding.

ECONOMIC DRIVERS--New Mexico’s economy is striking for the variation of economic performance and drivers across the state. Many rural areas are still responding to economic shocks to their sources of income that often happened many decades ago. In an ideal world, major urban hubs would absorb the outmigration from regions that are losing population. However, as rural communities navigate these challenges, urban areas have not been in a strong enough position to absorb displaced populations or in-migration. As the economy has evolved from industries that are rooted in place (such as agriculture and mining) to industries that thrive in more urban settings (such as professional services), the weaknesses of urban economies in New Mexico in comparison to other states stand out.

THE CHALLENGES--New Mexico’s per capita growth has been relatively low, and its income level has fallen further behind other states. . .The period of 2005-17 was exceptionally weak, marked by several years of per capita contraction. . .Arguably, the most important problem over 2005-17 was that state and local government activity made the downturn worse when fiscal policy could have partially offset the pain of the downturn. The decline in state government activity appears to be driven by a significant drop in tax collection that was only partially cushioned by increased federal spending. While New Mexico is now enjoying more robust growth, an economic upswing since 2018 has yet to offset the effects of a prolonged stagnation. Past dynamics suggest that today’s “boom” in growth will likely be followed by a period of “bust”. Whether the current higher growth should be expected to continue hinges on the sustainability of current growth drivers and the potential for others to emerge.

THE COUNTIES--A few urban counties, most of all Bernalillo County, drive the state’s overall economic activity, and their growth has lagged national trends. One can see the effects of state-level downturns across many counties, but state growth does not translate equally in all counties. In fact, some counties have grown in a negatively correlated way with statewide growth over the last 25 years. Depending on their local economic drivers, some counties are growing rapidly — for example, Lea and Eddy counties, which benefit directly from current oil and gas expansion in the Permian Basin. Several rural counties have seen growth, driven by different sectors in recent years, even as they face long-term pressures. Meanwhile, several urban economies are struggling to absorb population and labor. A deep dive into Albuquerque’s growth finds that an undersupply of housing is the most binding constraint today.

THE SUCCESSES-- Recent successes, including business investments in Albuquerque and Las Cruces and the expansion of universal childcare and tuition-free college, mark important steps forward. The state has channeled a great part of its oil and gas windfalls into permanent funds, ensuring increased reserves for use in education, early childhood, and future flexibility. Annual distributions from these reserves now account for major shares of education spending. . . New Mexico has also had some success in targeting sectors for investment attraction and in a public push in site development and site readiness for investment. The state also faces new and recurring stressors, and this report has several implications for strategy moving forward. 

SUGGESTIONS--New Mexico has improved its ability to save revenues generated during the current resource boom, but it will have to navigate spending tradeoffs. We suggest more deployment of fiscal resources to expand regional capacity to attract investment and actions to better address housing supply in urban areas. . .While New Mexico is moving in the right direction by targeting sectors and identifying key sites for development, the diversity of regional challenges and opportunities calls for greater regional tailoring. County-by-county analyses of diversification opportunities are available in this online repository. As for labor supply constraints, investments in childcare and higher education effectively target long-term pressures on talent retention. However, the obstacle remains housing. There are state and local actions that can be taken to allow housing supply to better meet growing demand.

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