The recession, moving south across the Great Plains like an Ice Age glacier, has finally caught up with the Southwest.
All across these Sun Belt states, where the energy industry, defense installations and new manufacturing plants had kept the recession at bay long after it had struck the Northeast and Midwest, the signs of slump can be seen.
Here in Albuquerque, a new $50 million silicon-wafer plant built by Intel Corp. for 5,000 workers stands idle because there is no market for its product. Elsewhere in New Mexico, thousands are jobless because the bottom has dropped out of the mining industry--of 45 uranium mines working in 1978, only nine are now open. And 3,000 miners lost their jobs in a single county last year as copper producers shut down.
In Arizona, unemployment soared over 10 percent as the state's copper mines came to a halt. Economists at the University of Arizona estimate that statewide retail sales for 1982 declined in constant dollars from 1981 figures. Both New Mexico and Arizona, strong growth states for decades, now have higher unemployment rates than most of New England.
Around Clinton and Elk City, Okla., boom towns during a gas-drilling frenzy a year ago, millions of dollars worth of drilling and hauling equipment sits idle. Plummeting grain prices and bumper crops have undercut the region's farmers--New Mexico and Oklahoma now rank 47th and 50th, respectively, in net income per farm--and forced some farm equipment dealers into bankruptcy.
Cotton reportedly is rotting in the fields in some parts of Oklahoma because the price it would bring makes it not worth harvesting. Many farmers are surviving only because their land is not mortgaged.
Even huge, growing Texas has not been spared. Unemployment in the Laredo area skyrocketed to 23.2 percent in September from 9.9 percent the year before. Freight tonnage in the port of Houston was down 25 percent.
Apartment vacancies in the Houston area are at an eight-year high. According to the Texas Employment Commission, the state is going through "an unprecedented span of high unemployment," the highest since the commission began issuing monthly reports in 1970.
"Everything is terrible," said Stephen Matthews, executive assistant to Oklahoma Gov. George Nigh. "The indicators just don't signal any upturn." Oklahoma's unemployment rate was 6.6 percent in November, among the lowest in the nation, but a year ago it was only 3.6 percent.
The Southwest has traditionally lagged behind national economic trends. By the same token, however, it may take longer for this region to recover, especially because of its heavy dependence on energy and mining.
"People in Houston used to think it was ordained by God that the city would grow," said Professor Louis Stern of the University of Houston. But because the area's economy is built on oil, gas, petrochemicals and oil field equipment manufacturing, he said, "only an increase in the real price of oil would reverse the slowdown. That doesn't appear likely for at least five years. There has been a significant drop in the demand for energy and a significant increase in the world supply of crude oil. The result is that even when the U.S. recovers, Houston may lag."
Carol T. F. Bennett, an economist at Texas Commerce Bank, said that last year Texas had "a huge increase in the manufacturing of oil field equipment," because of the drilling boom in west Texas and Oklahoma. "Now we have more than a year's inventory," and manufacturing probably will not pick up until the inventory is absorbed, she said.
In the same way that a return to vigorous growth in Texas and Oklahoma awaits the end of the worldwide oil glut and an increased demand for oil and gas, the outlook in New Mexico and Arizona depends on mining, where there is little cause for optimism.
Brian McDonald, director of the Center for Business and Economic Research at the University of New Mexico, said this state has "a diversified mining sector--copper, uranium, coal, potash and molybdenum. Unfortunately, they're all depressed right now. But we're better off than Arizona, where they only have copper."
James Covell, director of the Albuquerque Industrial Development Service, said that the state "is down 20,000 jobs, mostly in copper and uranium. The big yellowcake uranium plants anticipated the construction of nuclear power plants, and there just aren't any. The mines provided high paying jobs for low skilled people. Now in the mining towns we have waves of small business bankruptcies and repossessed mobile homes."
In Arizona, according to reports on the state economy by the business school of the University of Arizona, about 11,000 of the state's 25,000 miners are out of work and recovery prospects are poor. The slump is "symptomatic of the long-term, secular downward trend of our nation's copper industry as it competes in the world market," university economists reported in November.
The region's problems have been compounded by the financial difficulties facing its state and local governments, which have cut back on hiring because of declining revenues from the key industries. New Mexico, Arizona and Oklahoma all reduced traditional taxes or undertook to pay for capital projects out of current revenues when the mines and oil fields were booming a few years ago, and are now paying the price.
"State government employment is down 3 percent this year. I'm sure that's a first," McDonald said. "Two years ago we cut our broad based income, sales and property taxes because of the energy and mineral boom. Now, because of reduced returns from the severance taxes on mines and the gross receipts tax, the fiscal year that begins next July will be really rough."
In Arizona, according to a report by Marshall J. Vest of the University of Arizona, "the public sector was perhaps the biggest story during the 1980-82 period, registering unprecedented employment declines as revenue flows were severely restricted.
During past recessions, the public sector was used as a countercyclical tool as spending and employment were increased through such programs as CETA Comprehensive Employment and Training Act and Local Public Works. By contrast, federal aid to state and local government has been severely slashed under President Reagan's economic recovery program. Projections indicate this source of revenue will be cut in half by 1984."
These cutbacks in state and local government employment, and in federal spending programs, have undercut the traditional base of economic stability furnished to the Southwest by the vast military installations that dot the region. The entire Southwest, however, stands to benefit from increases in the defense budget, economists here say.
Tinker Air Force Base at Oklahoma City is the largest employer in the state, and Albuquerque's Kirtland Air Force Base is the largest in New Mexico. Lackland Air Force Base, outside San Antonio, and Davis-Monthan Air Force Base in Tucson also are mainstays of the local economies.
Here in Albuquerque, the second biggest employer--with about 7,000 workers--is Sandia National Laboratories, a Bell System subsidiary that conducts nuclear weapons engineering for the Department of Energy.
Even with defense outlays rising, however, there appears to be little prospect for an immediate turnaround until copper and oil prices rise. But the unusual burst of bad news in mining, energy and agriculture has not diminished what seems to be an inbred faith in the long-term growth and prosperity of the Southwest.
"We don't have, anywhere in Texas, the level of desperation or demoralization that you find elsewhere," said Bennett at Texas Commerce Bank. "That sense of pessimism about the future is not noticeable. We are approaching the highest level of housing starts in our history, retail and car sales are doing well, and there's room for cautious optimism."
Richard Leon, president of Leon Ltd., one of Albuquerque's leading commercial real estate developers, is pressing ahead with several major projects, including a 30-story office tower, because he remains convinced that the area will continue to grow.
"If you draw a triangle with the points at Los Angeles, Denver and Houston," he said, "we're in the center of the nation's most dynamic area. We have gas, water, clean air, our cost of living is one of the lowest in the nation and our standard of living one of the highest. There's no limit."