New Mexico Economy: Federal Labs, Oil, and Tourism

New Mexico is a smaller state economy, usually ranked in the lower third of U.S. states by GDP — the dollar value of everything a place makes and sells in a year. The New Mexico economy leans heavily on federal spending, oil and gas, and tourism, with a unique cluster of national laboratories that few other states can match.

This is a plain-English tour. For the national picture, see The State of the U.S. Economy and the Economy hub.

How big is the New Mexico economy?

For example, recent state GDP for New Mexico has run around $130 billion, according to the Bureau of Economic Analysis. Population is roughly 2.1 million, per the U.S. Census Bureau. Albuquerque, Santa Fe, Las Cruces, and the oil-rich southeast around Hobbs and Carlsbad anchor the main regional economies.

The biggest industries

New Mexico's industry mix is unusually shaped by federal money and natural resources. The main pillars are:

• Federal labs and defense — Los Alamos National Laboratory, Sandia National Laboratories, Kirtland Air Force Base, White Sands Missile Range, and Holloman Air Force Base together employ tens of thousands of high-wage workers.
• Oil and gas — the New Mexico portion of the Permian Basin in the southeast has made the state one of the top crude oil producers in the country.
• Tourism and the arts — Santa Fe, Taos, Carlsbad Caverns, White Sands, and a long film and TV production pipeline drive a major hospitality and creative economy.
• Government — federal, state, tribal, and local government together is one of the largest employer categories.
• Agriculture — dairy, cattle, pecans, chile peppers, and onions are all important.
• Healthcare — large hospital systems in Albuquerque and Santa Fe are major employers in a state with significant rural healthcare needs.

Jobs and wages

New Mexico labor data is published by the New Mexico Department of Workforce Solutions, with national-level numbers from the Bureau of Labor Statistics. For example, the New Mexico unemployment rate has typically run a little above the national average, with the oil-heavy southeast much tighter than rural northern counties.

The New Mexico minimum wage is $12.00 per hour, well above the federal floor of $7.25. Several cities, including Santa Fe and Albuquerque, set higher local minimums.

Taxes in New Mexico

New Mexico has a graduated state income tax with relatively modest rates. Social Security income is partially exempt for most retirees.

The state gross receipts tax functions like a sales tax and runs around 5.125% at the state level, with local add-ons that push the combined rate above 8% in many cities. State tax forms and rules live at the New Mexico Taxation and Revenue Department. You can read more about how sales tax works in our glossary.

Cost of living

Cost of living in New Mexico is below the national average across most of the state. Santa Fe is the most expensive metro, with Albuquerque and Las Cruces both relatively affordable. The federal government tracks region-specific Consumer Price Index data through the BLS West region, and HUD publishes Fair Market Rents for every county at HUD User.

The lab economy

Los Alamos and Sandia together employ more than 25,000 people, most of them in well-paid scientific and engineering roles. The labs anchor a deep base of contractors, suppliers, and spinoff startups, and they make Los Alamos County one of the highest-income counties in the country. Federal lab funding is also one of the most stable parts of the New Mexico economy through commodity cycles.

The Permian boom

The southeast corner of the state — Lea and Eddy counties — sits over part of the Permian Basin, the most productive U.S. oil field. Production has grown so fast that New Mexico has at times rivaled some of the largest oil-producing states. The boom funds a large share of state revenue through severance taxes and royalties, but it also makes the budget unusually exposed to oil prices.

Tourism, film, and the arts

Santa Fe, Taos, and Albuquerque draw visitors year-round for art markets, ski resorts, and unique southwestern cuisine. New Mexico has also become one of the most active film and TV production states per capita, anchored by Albuquerque Studios and a long-standing tax incentive program.

How does the New Mexico economy fit into the national picture?

New Mexico is one of the most federal-money-dependent and most oil-dependent state economies in the country at the same time — an unusual combination. Federal lab and defense spending provides a stable high-wage base, while oil revenue swings the state budget up and down with global prices.

A note on the numbers

Numbers in this article change every quarter — always check the latest from BEA, BLS, and the New Mexico Taxation and Revenue Department for the most current data.