2016 Regional Report: The Southwest

The Southwest states are well-positioned for the growth that's taking place among U.S. factories relocating to or expanding in Mexico.

ARKANSAS | #33 | SLOW AND STEADY
ArkansasArkansas’s fitful recovery from the Great Recession continues. The Natural State will experience slow, steady growth in 2016, slower still in 2017. So goes the forecast from Michael Pakko, chief economist and state economic forecaster at the Institute for Economic Advancement at the University of Arkansas at Little Rock. He believes gross state product will increase 3.6% this year, up from 2.5% in 2015. Next year, he predicts it will fall to 2.8%.

Pakko expects state payroll to grow 1.3% this year, then 1.1% in 2017. About one-third of the job growth will be concentrated in the professional and business sector. Regionally, the Fayetteville-Springdale-Rogers metropolitan statistical area, encompassing Northwest Arkansas and part of southern Missouri, paces the state growth curve, expanding at over 4% for most of the decade.

“Northwest Arkansas is smoking, it’s doing so well,” says Arkansas Chamber CEO Randy Zook. The Little Rock metro area is “doing okay,” he adds. Major announcements last year include Southwest Steel in Newport and Aerojet Rocketdyne in Calhoun County, both expansions valued at $18 million. In 2015, ArcBest announced expansion plans for Fort Smith and Nucor announced a major expansion of its Hickman sheet steel mill. Later this year, Big River Steel will open its massive $1.5 billion plant, a much-anticipated development.

Business leaders would like more from the state in terms of help with workforce development. After that? Says Zook, “Better highways. Then better tax rates.”


NEW MEXICO | #36 | OH SUSANA!

New Mexico’s economy flexed some muscle in 2015. Could the reason be a more business-friendly climate? Under Gov. Susana Martinez, the state has cut taxes 24 times, reduced its business tax rate by 22%, curbed practices derided as “tax pyramiding” and instituted a single-sales factor for manufacturers. These and new, more generous incentive policies, such as expanding discretionary funds to lure migratory executives, have won over business owners, says Minda McGonagle, lobbyist and state director for the National Federation of Independent Businesses. Still, New Mexico—one of the most federally-dependent states in the union—continues to lag its neighbors in productivity and job creation.

The Great Recession hit New Mexico hard; the state won’t return to 2006 peak employment until later this year. The legislature’s last economic forecast in September projects modest revenue growth through 2020. The economy remains rooted in its Big Three: Government, Oil and Gas, and Tourism. Federal spending supports the National Laboratories at Los Alamos and Albuquerque, as well as three Air Force bases. All have outsized footprints in the local economy.

Business leaders have helped launch a series of state and local programs designed to commercialize R&D from the government labs; results remain mixed. Private-sector expansion is paced by the healthcare industry, which accounted for more than half the new jobs created last year. Recent New Mexico job growth is fairly broad-based: eight industries added jobs and five posted losses. Manufacturing growth was flat last year. The mining sector—mainly oil and gas jobs—contracted.

The economy’s bright spot is global trade. In 2014, New Mexico exports rose 39% in value, a pace export advocates expect will continue through 2015. New Mexico’s merchandise exports totaled $3.8 billion in 2014, supported with rising cross-border trade. Union Pacific’s new $500 billion intermodal hub in Santa Teresa has spurred a trade boom, largely involving products originating elsewhere and heading to Mexico. And vice versa.

“New Mexico is a remote, lower-cost state,” observes Werner Global Logistics’ Luttrell. He notes that location in New Mexico brings access to two Tier 1 railroad intermodal sites and a strong interstate highway grid. “Depending on your supplier base, it can be advantageous to invest there.”

Albuquerque continues putting the Great Recession behind it. The city and environs lost about 7% of jobs in 2008, a loss not expected to be recouped until 2019. Construction, though, has improved and once again drives growth. Most new jobs are in healthcare, which accounts for one out of six metro jobs. Major wins across the state include MCS Industries’ $11.1 million investment in Santa Teresa and Convergys’s upgrade in Rio Grande, creating 250 jobs.

New Mexico has always attracted entrepreneurs and visionaries, says Gary Oppedahl, Albuquerque economic development director and former serial entrepreneur. “Here’s where Smokey the Bear, breakfast burritos and the atomic bomb were invented,” he says. “Big skies help people dream big.”


WHY WE’RE HERE / NEW MEXICO

Why We're in New MexicoWHO Andy Lim, CEO of Lavu

WHERE Albuquerque, NM

SITE HISTORY Leases 14,000 square feet over two floors in downtown office building.

WHY NEW MEXICO “It all comes down to an earthquake and a woman. I was a student in Taiwan during the horrendous earthquake in 1999, where 4,000 people died. I knew I wanted to start a new life elsewhere. I knew a woman in Albuquerque so I came here.”

BOTTOM LINE “I graduated with a MIS degree in 2004 and started Lavu, a smart-phone payment system, on my kitchen table. The region is beautiful, the cost of living is cheap and people want to help new businesses succeed. The environment here is totally pro-business; a startup gets plenty of support.”


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