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Thank you.

This is Fronteras, A Changing America.

I'm KC Counts.

Thank you for joining us.

As of the time I'm speaking these words, the average price of a gallon of gas in the US is over $4.

But the war in Iran may have far greater impacts to the economy.

And not just in the US, of course.

We'll discuss these potential and real impacts and more with Dr.

Chris Erickson, NMSU professor of economics and director of the center for Border Economic Development.

Thank you for joining us.

Thank you for having me.

I'm always glad to come.

Well, I think we have a lot to discuss, beginning with the top of mind issue of the war in Iran and how it is impacting our everyday lives.

Well, of course, you mentioned the price of gasoline, the price of oil.

Those are have major impacts on, people, on households, on, the, spending capacity of people because you can't really skimp on gasoline and that means that you have to make a cut corners in other places.

And so that has a real impact on households here in New Mexico the, the, the impact is a little bit more mixed because of course we have the oil and gas sector.

We are a major global oil exporter.

Our state by itself.

And of course, the United States in total is also the largest single producer of oil and exporter of oil in the world today, exceeding to Saudi Arabia and other countries in the Middle East.

And has been for the last couple of years, and for that reason, it is a net positive for our local economy, even though obviously the impact is, uneven, depending on whether you're a household, it consumes, oil and gasoline or whether your household that is working in the oil industry, in the energy industry.

Certainly it has, you know, U.S.

companies have, done pretty well during this last month.

They've done very well.

And, of course the state the state government is doing very well since we get much of our revenues at the state level from oil and gas industry.

Of course, when you look at it that way, it's a it's a it's a two-sided coin where you've got the individual families who are having to, as you said, cut corners in different ways, but also feeling a little bit of inflationary pressure, in other ways.

Sure.

It has, oil and gasoline prices, gasoline of course, affects transportation, and oil is also uses it as an input into production in the plastics and, in, in the cosmetics and the other products and and that, that, that impact of higher oil prices will have knock on effects and higher transportation costs will have knock on effects to, products that consumers are buying and increase inflation.

And in fact, last month we had the highest inflation in, I think four years.

And that was almost completely due to increases in energy costs and the knock on effects from that.

That, that, that very high energy, inflation reading.

And, if you, you know, one of the nice things we have in this state, though, is, there's a lot of talk about the state, giving a rebate, to the citizens of New Mexico based on this windfall, revenue from oil and gas.

And that certainly would go a long ways to make our citizens, well, off.

And I don't know if they'll actually decide to do that.

I'm an economist, not politician.

You said it.

You said it, so.

Yeah.

Lets hope it happens.

But I think that would be an obvious way for the state to, make sure that the the windfall wealth that we're getting in the state is spread around the population generally.

Now, we hear words from President Trump about how long the war in Iran might last.

We hear that it's almost over, That there's a deal and then there's not.

And so this back and forth in this uncertainty can't be good for the economy.

Well, I think it's safe to say that Donald Trump's presidency has been has increased a great deal of uncertainty in the economy.

My own family, my son's a businessman, he decided to actually close his business because of the uncertainty about tariffs.

And, you talk to other small business, he's a small business man, he doesnt have a large business, no direct employees but, but he, but he was importing toys from China, and you can imagine the impact of tariffs on then on off just made it so he couldn't plan.

Well, since you brought up the tariffs, I'll ask if he's impacted by the decision that those that some of the tariffs, enacted by the president were illegal.

And now we're looking at companies being able to sign up for refunds.

Well, I think he is trying to sign up for refund, but, you, but you mentioned the fact that it that, the tariffs were, were removed by the Supreme Court action.

But of course, the president then took action to reinstate many of those tariffs using a different mechanism, that mechanism, puts more limits on what he can do and there's also time limits on that.

But even that illustrates the off again, off again kinds of policies, we've had economic policies.

And whether you agree with those policies, their ultimate outcomes and their ultimate goals, certainty and the ability to be able to plan particularly for small business people, business person working on a relatively tight budget is, is important and it affects the economy and it affects the ability of people to do business.

So with $166 billion, I think the amount that is to be refunded, so far is what we're hearing.

Do you think those business owners that get some of that back will just have to hold on to it to potentially pay more tariffs down the road?

That's a very, that would be a logical conclusion since the tariffs have been reimposed and are being reimposed, I should say.

And of course the impact of that reimposition is uncertain because it again, it's more restrictive and, and has more limitations on it.

Some industries might see their tariffs even being higher than they were originally.

You added this also uncertainty, we're talking about international relations.

You add to this also the uncertainty of of, of the renegotiation of USMCA, which is the, which is sometimes referred to as NAFTA 2.0, the agreement between the United States, Canada and Mexico.

Aand, there's a great deal of uncertainty of what that renegotiation is going to, going to look like, anything from just continuing the status quo to, a broader agreement, although the agreement already is pretty broad to the agreement being, being, ended.

We have talked about this, I think, on KRWG-FM not too terribly long ago.

Is there now a timeline for renegotiation?

The renegotiations I believe are set to begin this summer.

And the timeline on when they need to be completed is a little bit uncertain, but I think the current agreement expires towards the end of this year.

What are the, impacts to the borderland economy?

So, interestingly, I'm I'm currently engaged in a study in this.

And when I get that study done, I'll be able to give you a more precise answer.

But the, but, the my preliminary understanding is we've had a number of businesses that have decided not to expand in the region.

We've had a number of businesses that have, that have seen their businesses disrupted, and then we've seen a few opportunities arise because of businesses that are near shoring and reshoring and into, into the region.

Mexico is seeing quite a bit of investment, that, that is, been the result of, the tariffs by President Trump.

People are able to locate Mexico and, if they meet the certain requirements, those requirements allow them to export to the United States under, USMCA.

And, and, and, and that has been an effective way for Mexico to attract foreign direct investment.

That's helpful for our borderlands.

So with a year behind us of the tariff policy, what are the positives and what are the negatives?

Is it a net positive for the economy overall?

Well its not a net positive.

I think some people overstate the negative.

I think that if you look at particular industries, particular businesses, we gave you the example of my of my son, it can be quite dramatic.

But if you look at the economy overall, it probably slowed growth by something like 1%.

That's not enough to cause a recession, but it is enough to reduce, to reduce, employment and put downward pressure on the economy.

You added this though, the, the if you look at the inflation, inflation, it probably is adding 1% inflation also.

And what about the overall cost of the war?

We understand that it's as much as $1 billion a day.

That's, that sounds right.

And of course it's also a disruption in the economic activity.

Private sector, the holding up of oil, exports the disruption of, of industry by a higher energy costs.

So there's a lot of knock on effects that aren't, aren't calculated in that direct impact.

You know, right now we have a great deal of uncertainty about what's going to happen.

We have, that, there are said to be negotiation or there are negotiations I think going on right now, we don't know what the outcome of those negotiations are, and there are threats that the war will resume, President Trump has threatened that war will resume if, the if the, negotiations fail and that could send oil prices up again, that could lead to another spike in prices that could have a lot knock on effects.

And we don't know if the Strait of Hormuz is going to be open tomorrow in a month, maybe it'll be continually under control of, maybe it'll be under control of Iran, and Iran will impose, duties similar to those in the Suez Canal, which will increase the cost of oil globally on an ongoing basis, kind of a permanent basis.

We really don't know what the outcome that, that kind of uncertainty again is not good for business.

It's not good for the economy.

And, and, it's hard to predict what the, ultimate outcome is until we know what these negotiations, what happens with these negotiations.

And, of course, around the region, around the globe, these impacts are being felt.

And so we are hearing about the possibility that, flights could be canceled because of a shortage of jet fuel, especially in Europe.

Yes.

I'm traveling to Europe this summer, taking my grandchildren and I am very concerned about that.

We were planning on traveling internally in, in, in Europe, by airplane.

And, you know, I have not booked those flights yet, unfortunately.

I know the price has gone up considerably from when I first started thinking about this trip.

And I'm very concerned that when I go to book them, they won't be available because they will cancel flights because of air travel.

That's that's an impact on people as individuals and as an impact on the economy.

And that's an impact that even if it's in Europe only where that shortage happens, that will be felt around the globe no doubt.

That, that's correct, because of course, businesses use air travel to do business.

And if you don't have that available to you and also transferred goods and services and you don't have that good available to you, it impacts, it impacts.

In some ways shortages are more disruptive than price hikes.

In some ways.

Both are bad, but shortages are often have more negative impact than, than actually raising them.

If it's available you can buy it.

If you can pay for it.

Yes.

It's not available you can't get it either way.

Exactly.

You have mentioned, a couple of times inflation and what we've seen here recently.

And so I think, we had core inflation remain maybe relatively steady at 2.5%.

But of course, when you add in the fuel and the energy and the food, right?

Is what we leave out of core inflation.

That's correct.

And why is that?

Well, we do of course, of course, the, the headline inflation when you're talking about the CPI is includes fuel and, and, and food and and but we take those out of and look at core inflation because core inflation economists believe and I agree with them because I'm an economist, but the core inflation we believe is an indicator of the long term trend.

And food and fuel tend to be highly volatile.

And they both on the downside and on the upside overstate what's really going on in the economy.

And so we saw that increase 3.3%.

Yeah.

From 2.4% that's February to March.

Yes.

What are the impacts ultimately of that?

Well, of course it increases the cost of living.

And if you don't get pay raises to compensate for that, and many of us won't.

I'm not.

You know many of us won't.

That will reduce our, our spending power and our ability to to live a good life.

And what about those interest rates?

Interest rates, haven't gone, there's, there's pressure both ways.

Labor markets are relatively weak.

They're not, they're not terrible, but they're weak, and they've been weakening.

So the trend there is is negative.

We still have seen overall growth quarter by quarter, fluctuations month by month.

And, and so that weakness in the labor market leads to lower interest rates, pressure on for lower interest rates.

And then but then off, seeing as inflation, which leads to pressure for higher interest rates.

And that's where the core inflation is more important because the fed tends to look at core inflation when they're deciding what to do about interest rates, because they think that's a better indicator of what they can actually control.

They don't think they can control the month to month fluctuations, but they do think they can control the fluctuations in core inflation.

Now of course, remember those two measures track close on average, track each other.

But the core inflation is more steady, less likely to show short term fluctuations.

How much longer does Jerome Powell have on the job now?

Well I couldn't tell you the exact date.

But I will say that it's not very much longer.

Yeah.

I think he's, his his term is set to expire very soon.

It may have already expired, and they're just waiting to replace.

I feel like it's May, but.

Yeah, yeah, yeah, it could be, It maybe May.

You know, I should know that because I teach, I teach money and banking, but I that's.

You can't know everything.

Yeah.

Yes.

Not the kind of thing I keep in my head.

But anyhow, his, his, there is a lot of controversy.

The law is ambiguous.

We've had previous fed chair.

So the president is there for a fed chair to remain in their position after they step down as, as chairman because they technically occupy a seat on the board of governors separate from being chair.

Now, the tradition for the last, I'm trying to think, I think the last time someone stayed on he was a chair was in the 60s.

The tradition has been for the chair to step down at the end of their term as chair, not at the end of their term as a member.

And Jerome Powell has threatened not to do that.

Now, of course, he's under, he's, he's under investigation.

He's not under indictment, but he's under investigation.

And he has said that he will not step down as long as he's being threatened with an investigation into his, management of the Federal Reserve.

And that investigation is related to the cost of of renovations for the building.

That's correct.

So the, the Eccles building, which is the building the Federal Reserve is in, and, of course, obviously you need a high security building when you're dealing with the Federal Reserve.

And like all federal buildings in Washington, DC, they're very expensive to renovate because of that security need.

And so the question is, was this excessively expensive or not?

And was it due to mismanagement?

Or A, was it was excessive?

B, is it because of mismanage- ment or corruption?

Or inflation?

Or inflation?

All right.

Well, we'll wait and see what happens there.

But what concerns do you have for the next chair of the Federal Reserve?

Well, I think we're in a very tight, tough situation.

I think that as I mentioned, there's a lot of competing factors.

The economy right now, should interest rates globally go down.

They've been kind of steady in the last few months.

and whether those interest rates would go up or down is always a problem for the Federal Reserve.

Sometimes, often there's a more clear path.

Well, inflation spiked after COVID.

It was clear interest rates had to go up.

And as inflation, as interest, and, and now bringing them back down some, the question is have we gone far enough or too far?

I will say by historical standards, going back, to the to the 90s.

Interest rates right now are about average.

Now, if you compare them to the 2000s and the 2000 tens, they're, theyre high.

But if you compare them to the 80s and 90s, they're quite a bit lower.

And so, these interest rates maybe about right.

But there's a lot of, there's a lot of concern about what to do with that.

I also think there are issues having to do with financial stability related to, to, private credit.

Well funny, when you mentioned when you were talking about the interest rates maybe being about right, I was thinking to myself, not when I look at my credit card interest rate.

Yes (Dr.

Erickson).

It certainly doesn't seem right at all.

Yeah, well, private credit, we've seen that recently, and this is credit that is, where they raise private money.

It's not heavily regulated.

Of course, you can't commit fraud, but but short of fraud violating fraud laws, it's not really subject special regulation as opposed to bank deposits.

And, and, and and so, and it's often tied up, in these investments, people who invest in these funds, it's tied up for 5 to 10 years.

And so it's it's very long private credit.

Well, the problem is that, they, there's some, questions about the underlying quality of the assets there that are somewhat similar to the questions about the underlying quality of mortgages back in 2007.

Boy (KC).

And so I, I'm not sure that it's quite at the same level as it was back then, but that's a rumbling and that's something that needs to be had off at the pass.

And that's something the new fed chairman has to worry about.

Well I want to talk a little bit about the job market.

We saw a loss in February of 133,000 jobs, but March had a nice rebound of 178,000 jobs overall in 2025.

181,000 jobs for the whole year.

Not a lot for one year.

No, the weakest, since 2020.

But we know what happened in 2020.

But before that 2003.

Yeah.

And so, what is your concern in terms of job growth in the country?

Well, of course, A. I. an issue.

And, we see A. I. is impacting employment.

There's if you read the Wall Street Journal, you can't pick up the Wall Street Journal and not see on the front page some story about A. I. and its impact on how business is being done.

It clearly increases the productivity of, people doing white collar jobs.

And that means you need less white collar workers.

Whether those it'll also create jobs by reducing costs, increasing demand, increasing production, and then increase in production makes up for the reduction in, in, jobs like it did in textiles in 8, in 8, in 1880 and in the UK, or it did in computer technology in the 1990s and 2000s in the United States that we have to wait and see.

But there are concerns that A. I. is different from those other technologies, and those other technologies aren't really, really augmented people, make people more productive, whereas A. I. may be replacing people rather than augmenting people.

Well, we just know when we know?

We will, just we, it is an ongoing and developing, issue.

And of course, it may not be true for every job will not be the same.

You know, you might be in some cases, it might make doctors much, much more productive and allow healthcare to improve.

And the quality of life, care and the amount of healthcare available to improve demand dramatically for people and increased demand for doctors, but at the same time reduce the need for lawyers.

You don't know what the outcome is going to be.

It's hard, its hard, to predict these things in advance, but it certainly is going to have a major impact on the labor markets.

And when you have a major change in labor markets, that always causes disruption in employment, as people who are going to go into one career are in one career, finally have to change their plans, and it takes a while to make that adjustment.

When we think about the auto workers in the 70s and 80s in Detroit and how long it took the economy to digest that change, that structural change in the economy, and we may be looking at the same kind of thing now.

And so we may see an increase in spike in employment And, and, and, and, and that will be a sorry increase or spike in unemployment.

And that may be, that, that, that maybe that's an ongoing issue.

Yeah, you mentioned regulation regarding credit.

And I mean theres very little to no regulation regarding A. I. And A. I. is moving so fast.

I gave my, A. I. an exam last year and it failed utterly.

I gave the A. I. the same exam morning, and it passed 100%.

And that's in one year.

I think anybody who's using it and has used it for a while could attest to the to the speed at which it has improved.

Yes.

Yeah.

And, and it's and it's like there's a, there's a new chip coming out in very soon.

I think it's set to be rolled out for the first time in, in a data center, this summer that is likely to increase the, the, speed at which A. I. can work and therefore its ability to compute by something like tenfold.

As an economist, how important do you think regulation is?

I think, well, as a human being, I think we have to we have to be careful.

It's obvious, obviously, the, the, the, the, potentials for abuse with A. I. has been the has been well laid out by science fiction for 50 years, and we need to take those warnings, to heart and, try to find some sort of regulation and ensure those sorts of things don't happen.

And of course, that increase in A. I. means an increase in data centers.

And we are certainly, feeling that here in southern and southwest New Mexico and in El Paso, of course, as well.

Let's talk a little bit about what you see, the impact of data centers.

Well, here's what I'm going to probably make the typical KRWG listener not happy with me, which I think they're generally good for our economy.

I recognize that there are issues with water.

I think those issues have been have been dealt with, and that they're they're manageable.

They're not zero, but they're manageable.

And I think that there are issues with I know there's obvious issues with air pollution, and, I recognize those.

But I also look at the the positive economic impact for our community, the opportunity for, for, for temporary jobs and construction, which are significant.

I think you can safely say that anybody who wants a construction job, and is willing to take an entry level job, in, southern Doña Ana County right now can get one, and, and I think there are significant opportunities for, and I think there are significant opportunities for permanent employment going forward.

Given the level of investment, the opportunities for employment are are quite modest.

You would expect it to be more because it's we're talking about very massive investment and the job increases in the thousands, in the low thousands and not not in the 10s or 20s of thousands given the size of the investment.

But it still is very significant and very important, and it's likely to have a lot of knock on effects for the economy.

And so, in the southern Doña Ana County and Doña Ana County in general, southern New Mexico in general, El Paso general, so given the environmental issues, the water, the air, it is obviously not a, a, it is a mixed bag.

And, and, but I think on the whole, it's a positive With the just little bit of time that we have left because we thought about these big storage facilities, and we have those for people.

Yeah.

In our region and I'm talking about immigrant detention, which cost us about $14 billion last year and is expected to increase if the goal, remains the same of mass deportation.

What kind of impact do you think those have on our economy?

Well, they have a positive impact on the economy in, in, in themselves because they employ people and they and they, they buy food and local food and they, they buy supplies and things like that.

But, obviously, looking for, of course, many of the immigrants that are held in these, facilities in, in, in our region are coming from other parts of the country.

On the whole, it's very difficult to find an economic study that says that immigration is negative for the country.

Is very difficult to find one.

The economic impact of immigrants is generally positive.

Again, some people are negatively affected because they directly compete for jobs with immigrants, and other people benefit because they hire immigrants that are more cost effective and they make a profit on them.

And so there's the costs and benefits.

And of course, the immigrants benefit.

That's why they're coming here.

And, but, but, but in terms of our region, it probably is a net positive.

But of course, you can't separate this from the humanity.

And so it's hard for me as a economist to say, I think they're a good idea because I don't I think that they have, now, speaking as a human being, I think they have a negative impact on people and are just not a positive thing.

All right.

Well, we are out of time.

Dr.

Chris Erickson, NMSU professor of economics and director of, the Border Center for Economic Development.

Did I get that right?

Close.

Thank you so much for being with us.

We appreciate it.

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