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Regional Report: The Southwest's Emerging Sectors Warm Up Recovery

The economies of Arizona, New Mexico, Oklahoma, and Texas are experiencing strong signs of economic recovery in established and emerging sectors.

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.

New Mexico
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.

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