Regional Report 2015: The Southwest

In the Southwest, Texas is the Leader. Hands down.


Oklahoma’s economy is driven by oil and gas; Oklahoma is doing well. The state’s economy grew at a rate of 4.2 percent in 2013 over the previous year, compared with the national 1.8 growth; only three states showed bigger gains. Job creation was led by the leisure and hospitality sector followed by the construction industry; IT jobs led the retreat.

Oklahoma Chamber of Commerce president Fred Morgan sees developing strength in aerospace and defense, bioscience, manufacturing, transportation and distribution and financial services. The state is also a major agricultural producer, which exposes its economy to future water shortage disruption. Mining-sector jobs—that includes most energy-sector employment—are expected to rebound this year, with employment gains of 3.6 percent, according to economist Russell Evans at Oklahoma City University. Workers compensation reform has pleased employers and helped make the state more competitive, says Norman.

Southwest-5Incoming governor Doug Ducey gained business support on the campaign trail by talking up economic diversification, “not just more construction,” says Stuart Goodman, co-founder of Goodman Schwartz Public Affairs, in Phoenix. He also promised no tax increases. The Tax Foundation ranks Oklahoma 38th out of 50 states and ranks its business climate 36th. Oklahoma spends over $2.18 billion annually on incentive programs.


Arkansas benefits from its location near the center of the North American market, supported by excellent transportation links. The presence of six Fortune 500 companies, including the world’s largest corporation—Walmart—attracts supplier clusters and generates an annual flow of well-trained professionals and executives who part ways with their employers and become consultants and entrepreneurs. The state ranks among the lowest for cost of doing business and cost of living. On the minus side, workforce readiness is an issue: education quality and high school completion rates remain problematic, despite being prioritized by every governor since Bill Clinton. Continuing weakening in the forestry-products sector has sapped economic value from the state, encouraging droves of people to leave the work force through age, attrition or relocation. Meanwhile, employers struggle with a work force many feel is not up to the challenges of today’s economy.

“WHY NEW MEXICO: The startup environment is a bit challenging, but there are a lot of enthusiastic investors.”

Funds have begun to trickle out to long-under-used community colleges to provide training tied to job-creation goals of specific employers. Arkansas needs more funding and more programs like that, says Grant Tennille, executive director of the Arkansas Economic Development Commission.

The start of construction this fall on the $1.3 billion Big River Steel Mill in Mississippi County has energized the business community; the plant will eventually hire more than 500 permanent workers. The project was financed by a combination of public and private monies, including $125 million in state bonds, $12 million from the county and $2 million from the City of Osceola. Business leaders supported Asa Hutchinson in his successful gubernatorial campaign, and expect his support for tax reform, more flexible environmental regulations and sharper emphasis on job creation. “As a campaigned for governor promising he’d start every day phoning business leaders,” says Randy Thurman, cofounder of Government Solutions, a Little Rock lobbyist. “I believe business development is his first priority.” The Tax Foundation ranks Arkansas 12th highest out of 50 states, and ranks it 35th in business tax climate. The state spends over $431 million annually on incentive programs.


Southwest-4Perennially finishing near the bottom of many economic rankings, New Mexico finished dead last in the nation in 2013 for job growth, and it is the only state to show a net loss of jobs since 2009. Companies such as Solo Cup and Merillat Cabinets have shut local employers such as HP, Intel and Eclipse Aerospace have gone through major layoffs in the past several years. Dependent since the 1940s on federally funded research programs at Los Alamos, Scandia National Laboratories and the Air Force laboratories, New Mexico is more dependent on federal spending than any other state.

Natural-resource exploitation, through mining and tourism, accounts for the state’s next largest chunk of revenue; still, most new jobs since 2011 have been in healthcare and social services. Emphasis in recent years on supporting high-tech startups—many of them commercializing R&D advances out of the labs—has produced a slight job-creation uptick; the University of New Mexico’s Bureau of Business & Economic Research predicts job growth will approach 1 percent this year and stay there midway through the next decade. To attract out-of-state employers, the non-partisan Think New Mexico calls for streamlining fees and filings into one portal and establishing post-performance tax rebates for relocating and expanding-in-place job creators.

New Mexico “is competing well and offering a lot of incentives” to attract relocators, says site-selector Angelou. In November New Mexicans elected Gov. Susana Martinez to a second term; business leaders expect she’ll accelerate efforts to woo out-of-state employers using discretionary funds, as well as press for education reforms. The Tax Foundation ranks New Mexico 14th lowest in tax burden out of 50 states and ranks its business tax climate 38th in the country. New Mexico spends over $253 million annually on incentive programs.

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