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Effects of COVID-19 on tourism, energy weigh on Texas, New Mexico, Louisiana

Keighton Hines and Keith R. Phillips

Economic performance within the individual states of the Eleventh District—Texas, New Mexico and Louisiana—reflected those states’ underlying relative dependence on the tourism and energy sectors in 2020 and the effects of COVID-19 cases and restrictions.

Overall, the U.S. experienced unprecedented economic swings because of the pandemic during 2020, with job losses in every industry, but particularly in leisure and hospitality and energy.

Employment declines widespread

The nation lost 10 million jobs from February to December 2020, an annualized rate of decline of 7.8 percent (Chart 1). Declines in Texas were less than the national average, while in Louisiana and New Mexico, they exceeded the U.S. average.

Chart 1: Texas, Louisiana Employment Shrinks Less than U.S. During Pandemic

Downloadable chart | Chart data

The pandemic most directly affected leisure and hospitality, with 3.8 million jobs lost nationally (a 26.2 percent annualized decline). Similarly, declines in this sector across the region ranged from 16.9 percent in Texas to 32.4 percent in New Mexico. The share of total jobs in the sector was also a factor. Just before the pandemic, leisure and hospitality represented 11.1 percent of jobs in the U.S., 12.0 percent in Louisiana, 11.7 percent in New Mexico and 10.9 percent in Texas.

New Mexico oversight damps tourism

While all three states generally implemented similar public health orders over the course of 2020, New Mexico was more proactive with a greater number of restrictions that were more aggressive and implemented earlier. New Mexico’s public health orders included prohibiting gatherings of more than 10 people; closing bars, restaurants, gyms, theaters and schools; instituting stay-at-home orders; and requiring travelers to New Mexico to self-isolate for two weeks.

Gov. Michelle Lujan Grisham’s quarantine order for out-of-state visitors from high-risk states was especially detrimental to New Mexico’s tourism industry—98 percent of tourists coming into New Mexico are from within the U.S. The vast majority of tourists, 87 percent, visit the area for the sole purpose of leisure. The prospect of 14-day self-isolation likely deterred many potential visitors.

Year-end incidence peaks; Native American population hard hit

Community restrictions appeared to limit cases and deaths, with incidence and mortality rates in New Mexico remaining below or on par with the U.S. for much of the year. In the last two months of 2020, both the U.S. and New Mexico recorded sharp increases in cases and deaths.

The fall and winter surges were most notable with detection in mid-November of widescale community spread. As in the U.S., holiday travel and family gatherings boosted year-end caseloads, which rose into January.

Some pockets of New Mexico were particularly hard hit. Native Americans, making up 11 percent of the state’s population, were disproportionately affected, recording a mortality rate 3.7 times greater than that for the rest of the state in 2020. A recent Brookings Institution report, drawing on Centers for Disease Control data, found that after adjusting for population age, the mortality rate for Native Americans in New Mexico was up to 10 times higher than that of whites through Feb. 11, 2021.

Fewer limits in Louisiana, higher COVID-19 rates

Louisiana experienced the highest average mobility and engagement index of the three states during the pandemic in 2020. It also had the most-lenient pandemic orders while recording the highest case and death rates per capita in the region. Even with the fewest restrictions, Louisiana still experienced a significant decline in leisure and hospitality jobs, though less than New Mexico but more than Texas.

The Louisiana COVID-19 death rate—53 percent higher than the national average—was 1,612 per million residents compared with New Mexico’s rate of 1,176 per million (3,327 for Native Americans, 911 for non-Native Americans) and Texas at 956 per million in 2020. The U.S. rate was 1,054 per million.

Global oversupply, pandemic weaken energy sector

The pandemic and accompanying energy market volatility delivered a one-two punch to regional state economies in 2020. Spot crude oil prices briefly were “negative”—producers theoretically paid buyers to take oil—in April after a record-breaking price plunge. The market tumult was the product of global COVID-19 containment measures, reduced demand and disintegration of a production agreement between OPEC and a group of nonaligned producers. Over a 10-month period, the mining industry—of which oil and gas is the largest part—lost 74,700 jobs in Texas, Louisiana and New Mexico.

The region represents three of the nation’s top 10 largest energy-producing states—Texas ranks No. 1, Louisiana No. 8 and New Mexico No. 9. The three states accounted for 53.0 percent of the U.S. total crude oil production and 38.2 percent of natural gas production in 2020. Though Texas is by far the largest contributor, the energy industry is also a key employment driver in New Mexico and Louisiana.

Collapsing oil prices hit New Mexico particularly hard, with mining employment falling at an annualized 39.0 percent rate. Oil and natural gas production and support activities accounted for nearly 3.0 percent of New Mexico’s employment in 2019, higher than that of the nation (0.3 percent), Texas (1.9 percent) and Louisiana (1.8 percent).

The U.S. rig count plunged in the months following the energy price collapse, to about one-third of March 2020 levels (Chart 2). In Texas, the count was down 70.6 percent; in New Mexico, it fell 58.0 percent, and in Louisiana, it slid 30.2 percent.

Chart 2: Rig Counts Fall Across Region Amid Weak Energy Prices in 2020

Downloadable chart | Chart data

With a subsequent oil-price rebound, rig counts rose during the latter portion of the year but remained well below March 2020 levels, especially in Texas and New Mexico.

Nationally, the year-end rig count was 56.3 percent below March levels. In Texas, rigs were down 60.6 percent; in New Mexico, they dropped 44.5 percent, and in Louisiana, they fell 16.9 percent. About one-third of Louisiana’s rig count was engaged in offshore drilling activity at year-end, which is less sensitive to short-term price and demand fluctuations. However, as shown in Chart 1, mining employment declined more in Louisiana than in Texas but not as much as in New Mexico.

Impacts from COVID-19, oil-price collapse

COVID-19 brought a public health catastrophe and historic economic contraction. Collapsing oil prices accompanied job losses across the region, although Texas declined less than the nation—at least partly due to fewer COVID-19 cases and deaths per capita.

New Mexico’s economy, with larger job shares of both leisure and hospitality and energy extraction, shrank more than the other two states and the national average. The state more strongly felt the impact of public health orders on mobility and engagement as well as tourism. These restrictions likely partially contained the spread of the pandemic for much of the year, with the notable exception of Native American areas, which suffered outsized infection and mortality rates.

About the Authors

Keighton Hines

Hines is a senior research analyst in the El Paso Branch of the Federal Reserve Bank of Dallas.

Keith R. Phillips

Phillips is an assistant vice president and senior economist in the San Antonio Branch of the Federal Reserve Bank of Dallas.

The views expressed are those of the authors and should not be attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System.

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