Mali R. Schantz-Feld (September 2010)
The recession and recovery in the southwestern states of Arizona, New Mexico, Oklahoma, and Texas seems to mirror the region's topography. Economic developers in this land of mountains, canyons, and plains have learned to surmount both highs and lows by creating stable financial plans for the future.
"The economy of the Southwest region is generally emerging from the recession with greater momentum than other parts of the country," says Dr. M. Ray Perryman, president and CEO of The Perryman Group, a Waco, Texas economic research firm. "A favorable climate, relatively low costs, and ongoing in-migration of workers are all advantages. Growth is likely in energy (both traditional and renewables), electronics and technology, health and biomedicine, and business services."
Perryman sees positive signs of recovery in all four southwestern states. "Texas has shown the strongest recovery, with gains in employment for the past six consecutive months. In fact, over half the net job growth in the country since the recovery began has been in Texas to date. Although New Mexico has lagged to some extent, Arizona and Oklahoma are also well into a recovery phase. Oklahoma has also maintained one of the lowest unemployment rates in the country through the downturn."
Some still see the road to recovery as an uphill climb. "The Arizona economy continues to struggle," says Jim Rounds, senior vice president at Elliott D. Pollack & Company. Excess single-family housing exists, and commercial product, population flows, and job creation are slow. "However, the state appears to be hitting rock bottom, which means the only remaining direction is up," he says.
One route to recovery is new avenues for economic development. The former Arizona Department of Commerce is becoming the quasi-public Arizona Commerce Authority. A board will oversee the agency, chaired by Governor Jan Brewer and comprised of state business leaders, Arizona university presidents, and state government officials. Backed by a $10 million state commitment, the new agency will focus on science and technology, aerospace and defense, renewable energy (especially solar), and small business entrepreneurship.
Don Cardon, director of the Arizona Department of Commerce, says the new Authority "will be more focused, more aggressive, and more competitive. This action is about a 21st century approach to advance Arizona's economy - competing on the global stage."
The past legislative session emphasized tax credits for research and development of solar power and other renewables including wind and geothermal energy. Stirling Energy Systems of Scottsdale, Arizona has engineering and test site operations at Sandia National Laboratories in Albuquerque, New Mexico that have spurred several Southwest solar projects from its SunCatcher™ solar dish engine system.
Renewables are also making headlines in New Mexico. GA-Solar is investing $1 billion in Guadalupe County to create a 300-megawatt solar array that will cover 2,500 acres and power up to 50,000 homes. The project, with completion expected in four years, should employ 75 full-time workers. Solar Distinction's photovoltaic manufacturing plant in Albuquerque will employ 300 workers within the first three years and grow to a 500-strong work force. Johnson Plate and Tower's new 84,000-square-foot wind tower manufacturing facility in Santa Teresa is expected to create 150 permanent jobs.
Green business, technology, film, and digital media have strong New Mexico clusters, with Spaceport America and the Borderplex as two major facilities. Spaceport America, under construction in the desert north of Las Cruces, is billed as the world's first purpose-built commercial spaceport. The complex will house the world headquarters of Virgin Galactic - Sir Richard Branson's airline offering suborbital space flights - along with satellite launches, military applications, green energy development, tourism, high-tech development, and educational opportunities.
The Borderplex, comprised of the Las Cruces NM MSA; the El Paso TX MSA; and Ciudad Juarez and Chihuahua, Mexico; hopes to attract aerospace, renewable energy, high-tech, food processing, manufacturing and logistics, business and financial services, and creative media outfits. Maquiladora industries and suppliers - those that operate outside the client's country - are revitalizing border cities such as Santa Teresa, where Foxconn, a Taiwanese electronic manufacturer, has located a plant in Chihuahua with a projected work force of up to 30,000 people. "We are also creating new avenues for trade by completing an expressway in Santa Teresa for commercial trucks (this is already resulting in an average of $1 billion in trade crossing through this port), and there are plans for rail relocation from El Paso to Santa Teresa," says Michael Moxey, New Mexico Economic Development Department spokesperson.
The Oklahoma economy is on the cusp of a job recovery, according to Robert C. Dauffenbach, director of the Center for Economic and Management Research at the Price College of Business. "Having lost 5.2 percent of its jobs from a peak non-farm employment level of about 1.6 million jobs, the recent months of March through May have yielded substantial gains of 16,000 jobs statewide. On a year-over-year basis in May, the total job count is down less than one percent," Dauffenbach says.
Manufacturing and energy industries are showing employment gains, with health services industries leading. "Another sign of relative strength in the Oklahoma economy is construction employment with an April 2010 job total at 69,300, only 100 short of the previous year's level," he says. Statistics concerning building permits, retail sales, and tax collections also show that "the Oklahoma economy appears to be in a recovery mode that is beginning to establish its own momentum."
Alternative energy is powering Oklahoma's future. Eagle Claw Fabrication will build a $28 million, 150,000-square-foot wind turbine tower production facility at the Port of Muskogee that is expected to create 175 jobs. Operations are scheduled to begin in spring 2011 and move to full capacity later that year. Eagle Claw chose the site for its access to the McClellan-Kerr Waterway, which provides the company substantial transportation savings, says Eagle Claw founder Tom Word. The port also offers access to markets not otherwise reachable from an inland location. The firm will acquire raw steel material and distribute turbine towers, its finished goods, by truck, rail, or barge.
Aerospace remains one of Oklahoma's strongest sectors. Tulsa and Oklahoma City have a majority of the state's more than 500 aerospace-related companies. Tinker Air Force Base in Oklahoma City is the largest military aircraft repair facility in the world, according to the Oklahoma Aeronautics Commission. It's also the state's largest single-site employer, with a work force of 27,000 people and an annual economic impact of more than $3 billion.
Texas' economy is reaching upward. "Texas entered 2009 with its economy mired in recession, a consequence of the global financial crisis, collapsing energy prices and falling exports. After outperforming the nation the previous four years, the state experienced steep declines in economic activity last year that nearly matched the U.S. freefall," reported the Federal Reserve Bank of Dallas' Southwest Economy. However, at the end of 2009, the labor market began to show positive signs across manufacturing, exports, housing, energy, and transportation. The Dallas Fed's Texas Manufacturing Outlook Survey predicted continued expansion this year, with indexes for new orders and shipments signaling moderate manufacturing growth.
"Texas' economic recovery is on track," stated Texas A&M's Real Estate Center in a July 2010 report. Education and health services; mining and logging; professional and business services; leisure and hospitality; manufacturing; and transportation, warehousing, utilities, and the government sector had more jobs in June 2010 than in June 2009, the report found. And the honors from media outlets are coming in. Texas won Area Development's Silver Shovel award this year. In July, CNBC named Texas America's best state for business for the second time. CEO Magazine named it the best state to do business for the sixth year in a row, and Forbes dubbed six of Texas' metro areas recovery capitals. Austin's government and tech sectors, Dallas and Fort Worth's major corporate operations, Houston's oil industry ties, and San Antonio's military presence all helped these metros recover from the recession quickly.
Governor Rick Perry announced on his Facebook page a $1.4 million investment through the Texas Enterprise Fund (TEF) for Facebook to create a sales and operations office in Austin that will generate 200 jobs and more than $3.1 million in capital investment. TEF will also help fund Allstate Insurance's San Antonio bilingual customer information center, Natura World's Wichita Falls manufacturing facility and corporate headquarters, and Hanger Orthopedic Group's Austin headquarters relocation.
Across these sunny states, economic recovery is heating up. Based on the positive growth thus far, it seems likely that the region will continue to experience this business-based warming trend.