If you’ve ever seen a black-and-white portrait of Stephen King on the back of one of his books, you get an idea of what Jeff Mitchell looks like.

What Mitchell has to say can be just as frightening as a horror novel, though he's not prone to hyperbole.

Mitchell heads the University of New Mexico's Bureau of Business & Economic Research, which uses hard data to make projections and estimations about the state's economy. BBER's work is sought out by cities like Santa Fe, which use the data to make policy decisions, such as how much public money should be invested in the art economy, whether minimum wage works or government-job commuters sap local dollars.

Seated in his office in the east end of Oñate Hall at the Albuquerque campus, Mitchell acknowledges that New Mexico's economy is struggling.

University of New Mexico’s Jeff Mitchell says New Mexico’s economy still has a long way to go.
University of New Mexico’s Jeff Mitchell says New Mexico’s economy still has a long way to go. | Joey Peters

“It’s sobering,” he says. “There’s little that you can point to that would give you reason to believe that things will just suddenly become better again.”

The state's job growth since the Great Recession has been among the slowest in the nation. Since 2010, around the time the US economy started crawling out of the hole left by the crash at the end of the previous decade, New Mexico's job growth has been anemic at best.

The US quarterly job-growth rate has stayed consistent at about 2 percent since 2012, while New Mexico's rate has been relatively flat.

Some blame the state's economic plight on its long overreliance on government jobs, which are often the first to disappear in a time of austerity. Others cite a lack of political will to use New Mexico's untapped resources—like that $14 billion stash in the state's Permanent Fund that mostly sits to collect interest— on key social programs that might address the state's widespread poverty.

Both explanations contain a germ of truth but fail to capture the full picture of why the state's economic recovery is so weak. From banks to oil to health care, we've got problems.

Consider Gary Hadley's plan to upgrade his Santa Fe car wash.

He wants to add an automatic drive-thru wash and replace the business' self-serve equipment. Hadley, who's owned his namesake car wash in Santa Fe's industrial section just east of Agua Fría Village for more than 30 years, says this fine-tuning is necessary.

"I have to do this to stay competitive," he says. "After 15, 20 years the equipment becomes old and the place becomes stale."

To fund the update, he'll need a loan. Last spring, Hadley approached Bank of America.

For three months, he says, he went back and forth with the bank, filling out reams of forms to try to secure cash for his capital investment. This time around, things were much different than in 1998— the last time he sought out such a big loan.

In the wake of the financial crash caused largely by toxic loans, new regulations require big banks to maintain certain levels of capital to prevent future crises. That meant Bank of America required a higher credit score and greater cash flow from Hadley than his previous loan.

"They wanted everything, every paper, every notice," he explains.

For his last loan, Hadley secured funding from another multinational bank to redo the two underground storage tanks in the gas station on his premises. He's since completely shut down the gas station, acknowledging that there's "no more money left for an independent gasoline business."

But he's optimistic that his planned upgrades will bring him more business.

A few months after he applied for the loan, Hadley says Bank of America started hinting he wouldn't be approved.

"They didn't say why directly," he says. "They didn't seem interested, even from the beginning."

Hadley's story illustrates a common problem— seeking new capital.

Anson Stevens-Bollen
Anson Stevens-Bollen

Mitchell attributes this to a recent decline in local and regional banks. In the last decade, small- and medium-sized businesses had a better shot at getting loans from banks based in their communities.

"You went into that bank, they knew your business, you got loans, you were able to expand," Mitchell says. "Now that business goes into a commercial bank and [the bank says], 'We're not interested— we're only interested in loans where people are borrowing $25 million and up that have the highest collateral, that are bulletproof credit risks.' That small business that doesn't have that kind of collateral is out of luck."

Since the recession, financial consolidation has also been a banking trend. Two large local banks— Albuquerque's First Community Bank and Santa Fe's Charter Bank—sold to bigger banks, and multinational banks now have greater representation in New Mexico.

Business owners like Hadley found fewer banks willing to lend to them.

That's partly because bigger banks make many of their decisions in other cities and other states, a point that Chip Chippeaux, chairman of Century Bank, emphasizes. Because his bank is based in Santa Fe, he argues that it can take more chances on his community.

"We know a circumstance; we can take that into account," he says. "A larger bank runs you through a credit model. If you don't pass, you fail."

The trend has been costly. Though the decline of local banks can't single-handedly explain the slow growth, it helps shed light on why smaller businesses have been having a rough go at it here.

In the past four years, the number of overall jobs at New Mexico's smallest businesses—those made up of five employees or fewer—shrunk by 0.3 percent, according to the US Bureau of Labor Statistics. That dropped New Mexico to 48 th in the nation in small business job growth.

It's a sharp contrast to 2001 through 2007, when jobs at New Mexico's smallest businesses grew by 2.3 percent, a rate that ranked 19 th best in the nation at the time.

Growth is even slower at the state's bigger businesses.

From 2010 to 2014, job growth in businesses of more than 100 employees flatlined, dropping New Mexico to last in the nation in larger-business growth.

To Mitchell, the poor performance explains the pervasiveness of the state's economic troubles. Plus, no single industry is dragging the rest of the state down or lifting it up.

"Typically, somebody steps up," Mitchell explains. "They create jobs and they pay high salaries, and people start consuming, and everybody starts feeling happy and giddy, and everything starts cooking."

From 2004 through 2006, for example, the state's construction industry outperformed nearly every other job sector. With job growth of between 6 and 12 percent, it propelled the state's overall private sector job growth from 1.5 percent to just over 4 percent through the same period. Construction jobs similarly led the state's employment growth in the mid-'90s.

"Everybody's sort of looking around, waiting for something to happen that's going to lead to this uptick," Mitchell says. "And we keep waiting."

Take, for example, the state's professional and technical services sector. These are the jobs that pay high wages to highly educated, highly trained workers—people like architects, lawyers, accountants and scientists.

These are also the jobs leading the economic recovery in other parts of the country.

Here, not so much. New Mexico's growth in this job sector ranks among the worst in the nation.

Part of the reason is that professional and technical jobs depend on other fields. Architects need a healthy construction industry, and lawyers need businesses and relatively affluent people who need representation. Because many scientists here rely on the public sector, they need national laboratories booming instead of cutting back.

"The drivers are not there," Mitchell says. To be fair, some industries are performing better than others.

New Mexico's crude-mining industry, for example, saw a staggering 8 percent increase in employment growth in the past four years, by far the best performance in the state.

The Permian Basin, which encompasses parts of southeastern New Mexico, is one of the highestproducing crude-oil regions in the world. But when it comes to direct job employment, the oil and gas industry's impact is marginal.

Mining of fossil fuels provided jobs for 36,000 people in the state in 2013, according to the US Department of Commerce's Bureau of Economic Analysis. Still, that only constitutes 3.4 percent of New Mexico's entire workforce. Comparing it to three bigger oil states adds perspective.

North Dakota, that jewel of domestic energy production, counts fossil-fuel miners among 5 percent of its workforce. So does Alaska. Wyoming leads the pack with nearly 9 percent. The energy industry also constitutes a greater share of personal income in all three states.

One reason for these numbers is that North Dakota, Alaska and Wyoming have fewer people than New Mexico. Key industries stand out more in less populated regions.

"The smaller you are, the more likely one industry can play a disproportionate role because there's less room for diversity," says Chris Mehl, a policy director at Montana-based nonprofit research group Headwaters Economics.

Technological efficiency of the oil and gas industry, he says, leads to a high-revenue, low-employment ratio compared to, say, the restaurant business.

In oil and gas, Mehl says, a small number of people "can create an enormous amount of wealth. Restaurants require a high labor cost. Energy is more about capital."

The state's oil and gas industry is also limited by region. While the Permian Basin swarms areas in New Mexico like Artesia, Hobbs and Lea County, the majority of this geological formation lies in Texas.

A big portion of the trickle-down effect of the industry, in other words, falls outside our state.

"A lot of that money is moving into places that are the largest, closest urban centers—places where you're going to see a lot of service providers [and] people doing field engineering who are running the drilling companies," Mitchell says, mentioning Lubbock and Midland-Odessa, which are both in western Texas.

New Mexico's largest urban area, Albuquerque, is too far from the Permian Basin to feel a significant effect from oil and gas mining. Likewise, the natural gas reserves in the Four Corners area's San Juan Basin are not significant enough to impact the rest of New Mexico's economy.

But the energy industry offers something that most other New Mexico industries don't—the potential to produce large sums of money for state and local governments. On average, the industry brings $2 billion to the state through taxes and royalties, according to the state Legislative Finance Committee.

"The revenue allows the state to do things it never could," says Mehl.

How much of that money is spent on public services is another story. Though oil and gas revenue plays a large role in New Mexico's budget, a political unwillingness to take full advantage arguably undermines the industry's economic impact.

Broadly speaking, the oil and gas industry is taxed three ways in New Mexico. The state Severance Tax Permanent Fund collects 3.75 percent of oil and gas sales, and the Emergency School Tax collects 3.15 percent.

On top of this, oil companies that drill on state trust land must pay roughly 12 percent of the value of all the oil and gas they produce to the Land Grant Permanent Fund. This fund holds $14 billion in reserves—the third largest of its kind in the country behind Alaska and Texas. In recent years, the fund has recieved about $800 million in annual revenue. But just over $500 million from the fund is spent on public services each year.

For years, state lawmakers have blocked efforts to dip further into this "rainy day" fund, arguing that it should be saved to keep the state's treasury strong. Yet that means its effect is minimal on the economy today.

"It's kind of like if you get a big bump in your income, you get more money, you put it in your savings and you don't start spending it," Mitchell says.

Still, the state's energy sector isn't as disappointing as others.

Health care growth, for example, benefitted most of the states that opted into Medicaid expansions from federal health care reforms. But not New Mexico.

When the first enrollment period of the federal Affordable Care Act opened in late 2013, Maria Perez was on a mission to raise awareness in five Northern New Mexico counties and to enroll as many people as possible in the recently expanded health coverage.

Bureaucrats and advocates fought over how that expansion should take place.

The New Mexico Health Insurance Exchange, tasked with creating the marketplace for health care plans under the ACA—or Obamacare as it's come to be known—paid $7 million to a Milwaukee-based ad agency for an advertising blitz. The plan largely failed, as only 11 percent of the uninsured adults who were eligible to shop on the exchange actually did so.

The state also paid grants to advocacy groups like Health Action New Mexico—Perez' employer—to do community outreach.

"Advocacy organizations with minimum funding were taking the brunt of the work," Perez says. "It just made it incredibly difficult."

These groups placed a lot of emphasis on the Medicaid expansion, which wasn't part of the Health Insurance Exchange. Perez spent months scheduling events in public spaces, such as libraries, schools and community centers, across Northern New Mexico.

"I worked on the ground trying to coordinate events, to really find in each region who was doing enrollments, who had enrollment specialists, who had the capacity to do enrollments outside of their office," Perez says. "That in itself was a challenge."

Her efforts weren't in vain. During that period, more than 150,000 people enrolled in Medicaid as a result of the expansion. Comparatively, roughly 30,000 enrolled in other coverage through the exchange.

But the spike in new patients in both programs came slower than expected. As a result, New Mexico's health care industry slogged through 2013 and into 2014. In fact, the sector saw its slowest job growth in more than two decades.

This surprised Mitchell and many of his fellow economists. "It's historically been a very rapidly growing sector," Mitchell says of health care. "It was surprisingly stable during the worst of the recession."

Throughout the previous decade, growth in the private medical and education industries (grouped together in state statistics) in New Mexico consistently hovered around 2 and 5 percent each year.

Throughout 2013 and 2014, however, that growth shrunk to below 1 percent.

So far, these developments undermine earlier projections. In 2011, New Mexico Voices for Children economist Kelly O'Donnell, who previously served in Gov. Bill Richardson's administration, predicted that Obamacare's rollout would immediately and positively impact New Mexico "not just on the health of its residents, but on the health of its economy."

From the summer of 2013 through the summer of 2014, fewer than 1,000 new jobs were created in New Mexico's education and health care sectors, according to Bureau of Labor Statistics surveys. That's much less than Voices for Children's projected 5,000 to 7,000 new health care jobs for 2014.

Public health consultant Terry Schleder, who like Perez worked on the front lines to register previously uninsured people for coverage, says things didn't heat up until near the end of the enrollment period. At that point, advocates got a better grip on several new policy requirements.

Newly eligible Medicaid patients, for example, couldn't enroll for their coverage with the state Health Insurance Exchange. Instead, they had to register on a portal called YES-New Mexico.

The setup created a lot of confusion, and Schleder faults the exchange for failing to do much of the outreach itself.

Still, economists are predicting a coming spike in health care jobs from needed services for new Medicaid enrollees.

"Things don't always respond one to one; there [are] always lags," Mitchell says.

New Mexico's cloudy economic forecast might have other silver linings.

Much, for example, is made of the state's "brain drain"—the supposed mass exodus of highly educated people who take their talents to bigger markets to create jobs while New Mexico continues to struggle.

Public relations consultant Chris Cervini, who moved to Austin, Texas, from New Mexico last year to pursue job opportunities, seemed to embody this trend after writing a widely publicized blog post explaining his move. Yet he warns people not to obsess about the yuppie emigration narrative.

"I think there [are] incredibly smart, talented people in the state," says Cervini, who spent the majority of his life in New Mexico. "But when you have net losses for people year after year, you're going to lose smart people. You're going to lose talented people."

US Census data show that from 2010 through 2013, the state experienced a net migration loss of more than 18,000 people. But statistics don't say whether the people who left are New Mexico's best and brightest, Mitchell says.

"It's very difficult to tell who's moving out," he says. "The data is not that simple."

Likewise, Mitchell says, there's no way to know whether everybody who's leaving is planning to be "gone for good," as Albuquerque Business First recently described the phenomenon.

Cervini is hoping to return, as are many friends and colleagues who've left the state and are wistful about moving back.

"There are good people who would love to come back, but they just can't make a go of it right now," he says.

Small-business owners might have reason for hope. While local and regional banks are stepping out of the picture, microlenders like Accion New Mexico and WESST are picking up the pace of lending. Accion, for example, gave out 195 loans in 2009 and 322 loans in the first 10 months of 2014.

Accion also agreed to give Gary Hadley the $400,000 he needed to do the upgrades on his car wash after Bank of America rejected him. Nonprofit lenders like Accion get much of their funding from federal and community grants and the New Mexico Small Business Investment Corporation, which funnels state money—some of it derived from oil and gas—to microlenders.

"Their mission, in a way, is social," Mitchell says.

"They don't have stockholders who are wanting a large return on their investment."

Hadley's planning to complete his car wash upgrades by spring. "We're trying to do everything as economically as possible," he says.

But that won't be enough for an economic renaissance.

Local economists project that the state won't fully recover from the recession for four more years. According to Bob Richards, an economist with the state Department of Workforce Solutions, the state's employment numbers will reach 855,000 people— where it last stood before the recession—sometime in the middle of 2018.

Likewise, Mitchell projects the state's overall job growth rate to catch up with the rest of the nation around that time. But even if New Mexico gets to that point, Mitchell cautions that it won't be nearly enough to make up for the comparatively slow performance that's happened to date.

If that problem isn't addressed directly and soon, New Mexico will likely stay at the bottom of the list of key economic indicators.

"We're not looking at something where we're going to just suddenly take off and catch up from what we've lost before," Mitchell says. "We will only sort of continue to grow."