Wednesday, April 01, 2009

Funny Numbers: Top State Economist Says NM Jobless Stats Are An "Artifact," Rate Is Higher, Plus: More From The NM Biz Beat As Slump Grinds On 

Dr. Lee Reynis
One of the state's top economists is boldly knocking down the Sunshine Crowd, revealing in detail why the New Mexico unemployment rate is actually much higher than the reported numbers. After spotting a snippet buried deep in a newspaper article that said she was questioning the state figures but did not explain why, we asked Dr. Lee Reynis, longtime director of the University of New Mexico's Institute of Applied Research Services and the Bureau of Business and Economic Research, to explain her stance. Her response is a real eye-opener for the politicos who argue "it is not as bad here as elsewhere" and for the NM media as it goes about reporting the latest business news.

Historically, NM's rate of unemployment has been significantly higher than the US average, although it was occasionally and usually briefly, as in the aftermath of the 90-91 recession, at or slightly below the US. The Bureau of Labor Statistics made a change in methodology sometime around 2005 forcing us to conform to a regional control total and, since around 2007, has been requiring that the NM Dept. of Workforce Solutions use their control totals. With these changes, NM's rates have been extremely low.

Today the US unemployment rate is 8.1% versus NM's rate of 5.4%. We believe that the low New Mexico unemployment rate is a statistical artifact. As corroborating evidence, look at the rate of unemployment claims (compared) to the number counted as unemployed. Today (the claims) are much, much higher than in the past.

No one really noticed the change in how we tote up the jobless rate until now because the economy was booming three years ago. In fact, we recall commenting a while back how it was gratifying to see single digit unemployment rates in some of the northern counties that for decades have had double digit rates. Looks like we weren't getting the full story.

In a September 28th ABQ Journal piece, Dr. Reynis questioned the state jobless count because it excluded people who are no longer looking for work and skews the rate downward, but now she has gone deeper, raising a significant public policy issue.


If Reynis is right--which seems to be the case since state labor officials have opted not to comment on her stance--state policy makers, the NM Congressional delegation and Legislature are not getting the full picture.

A question the media may want to explore: Can the state Workforce Solutions Department give us the true rate of unemployment by not using the methodology that Reynis says is skewing the numbers? Give us two sets of numbers, if they must?

For our Congressional delegation: Does an erroneous reported lower unemployment rate effect the federal assistance we are eligible to receive to alleviate the impact of lost jobs? If so, what should we do about it?

For policy makers: If you don't know the extent of the problem, how can you get to the solution? Should we be focusing on weekly jobless claims at the state level, and not the "seasonally adjusted unemployment rate" to give us the real picture of where we stand?

All of us know this downturn has a different feel to it than past recessions. We hear of friends and neighbors being laid off or moving on, of some of our favorite corner stores closing up or cutting back hours. We know about the mass layoffs at Eclipse, Intel and in the copper mines of Grant County. And we see the huge declines in tax collections that are now threatening even those sacrosanct government jobs. And we know the bear market in oil and gas prices is costing the state not only millions in revenue, but lost jobs in those industries.

The Reynis analysis pokes a hole in the Polyannish economic scenarios that hold sway over the public dialogue in New Mexico, no matter the current trend. Because we depend (and enjoy) the bevy of government jobs that are the backbone of the state's economy, what is happening in the "real" economy seems to get downplayed or, as we noted earlier, dismissed with a wave of the hand that things here are better than in Outer Mongolia, so enjoy your enchiladas and don't worry.

New Mexico policy makers need a new paradigm to build a diversified economy (not just government jobs and energy revenues), but first they need the truth. By stripping bare "a statistical artifact" Reynis is showing the way.


If government starts laying off workers or instituting furloughs, it is going to shell-shock this state where those jobs have nearly always been a pocket of safety. From the city of Santa Fe comes word that this Holy Grail may soon be defiled:

Budget balancing actions involving city employees are still being negotiated with unions, city manager Galen Buller and finance director David Millican said. Possible actions on that front include pay reductions, reduced work schedules and furloughs.

In early March, ABQ City Council budget chair Ken Sanchez warned of a deficit of $40 million for the budget year starting July 1st. You can bet that Mayor Chavez--up for re-election in October--is going to go all out to avoid laying off employees--at least until after the Oct. 6 election. (Chavez sends his proposed budget to the City Council today. It calls for not filling vacant position and cutting construction projects, but no layoffs).


The Wall Street Journal takes note this week of the sky-high compensation going on at the University of New Mexico and one of the reasons UNM President Schmidly was given a vote of no-confidence by the faculty.

A recent university report showed budgeted salaries -- excluding other perks -- for senior executives increased 71% to more than $9.8 million between 2002 and 2008. (Mr. Schmidly took the reins in 2007.)

The paper's take on UNM came in a report that began:

The furor over big bonuses at American International Group Inc. and other Wall Street firms is prompting nonprofit organizations to brace for more scrutiny of their executive pay practices.

And now layoffs at UNM Press


Jim Baca was mayor of ABQ from 1997 to 2001. We had it as four years earlier in our early draft....GOP mayoral hopeful RJ Berry offically qualified for public financing Tuesday. Berry, Mayor Chavez and Dem Richard Romero will receive $328,000 for their campaigns this Friday. We covered the mayor's race extensively on the Tuesday blog.

Jay Leno: "According to the government, GM's Rick Wagoner was forced to resign because of poor performance. That's embarrassing." You run "an organization that loses billions of dollars and then get fired by a guy who heads up an organization that loses trillions of dollars."

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