Do you remember the start of the COVID-19 pandemic, when there was uncertainty about the trajectory of the virus and its effects on the local and national economy?
Well, after a brief hiatus earlier this year, that economic uncertainty is back as cases rise in New Mexico and across the country, according to Nick Sly, assistant vice president and branch manager of the Denver branch for the Federal Reserve Bank of Kansas City. .
“We are back to a point where uncertainty is really changing the behavior of people,” Sly said during a presentation hosted by the Albuquerque Economic Forum on Wednesday.
During his presentation, Sly said the national economy has started to recover from the effects of the economic slowdown associated with the pandemic, with the national unemployment rate falling to 5.4% in July, nearly half of that. that it was the year before.
But Sly said the increases in cases associated with the Delta variant have created a national environment similar to what we saw at the start of the pandemic, where the gaps between positive and negative economic forecasts are again wider than they are. habit.
Sly said it’s still unclear whether consumers, who have slowly started spending more on services in recent months, will continue to do so.
“I think there is a deep level of uncertainty about how consumers will react to the trajectory of the pandemic,” Sly said.
Until businesses understand how consumers will react, Sly said they could behave more conservatively, postponing big purchases of equipment or land, which could hurt the still fragile economic recovery.
Sly added that small businesses, which have already struggled disproportionately during the pandemic, could be more severely affected than larger ones, given that they typically have fewer resources and more limited cash reserves to get through them. difficult times. Sly said this trend is having a disproportionate impact on New Mexico, where about a third of the workforce is employed by a small business.
More generally, Sly noted that the economic recovery in New Mexico has differed from that of the country. In other states, the challenges for people to return to the workforce have been largely limited to the leisure and hospitality sector. In New Mexico, however, Sly said these challenges are apparent in industries ranging from manufacturing to finance.
“There has been a significant drop in labor market participation here in New Mexico, in a state that was already… among its lowest in labor market participation,” he said.
In addition to expanded unemployment benefits, Sly expressed concerns over the search for childcare services and uncertainty over whether schools will remain open, which could prevent New Mexicans from returning. in the labor market.
Going forward, Sly said New Mexico’s labor force participation rate will be a key metric to watch, adding that encouraging New Mexicans to start looking for work again will be critical as the state seeks employment. to put the economic downturn in the rearview mirror.
“I think the New Mexico job market discussion is about not just getting people to find jobs, but thinking about how to participate in the job market,” Sly said.
Stephen Hamway covers economic development, health care and tourism for the Journal. He can be contacted at [email protected]