Business Indicators - February 2004

Business Indicators

by R. Keith Schwer

Nevada’s economy continues to expand. Job growth equaled 3.6 percent for November 2003 over the same month a year ago. Visitor volume grew at 3.1 percent and gaming revenue was up 1.5 percent. Most noteworthy, taxable-sales growth reached a one-month growth rate of 10.8 percent. Of course, a strong month does not yield a long-run cyclical uptrend, but the news is encouraging.

The Nevada economy experienced a recession similar to that of the U.S. in 2001; and, during the weak recovery of 2002 and the first half of 2003, the economy performed at moderate rates. The last half of 2003, however, has clearly been a period of more rapid expansion in Nevada. In short, jobs and income in Nevada are at levels above early 2001, when the last economic expansion peaked.

Manufacturing has generally had a harder time than service-based industries since 2000. Moreover, travel and tourism, which experienced only flat growth until Sept. 11, have been adversely affected by terrorism and unsettling world events since. Not surprisingly, the Silver State has not returned to the rapid growth rates of the 1990s. The Nevada economy, however, has been performing better than the U.S. economy during the second half of 2003. Most noticeably, the U.S. economy continues to experience a "jobless recovery," though there are signs U.S. job prospects seem more optimistic for 2004; whereas Nevada has posted job growth.

Construction activity, an economic sector subject to greater spending variability than most other sectors, has retained bellwether consistency since 2000, keeping the economy on a more even keel than might otherwise have been the case. Nationally, low interest rates and favorable consumer-wealth holding positions have resulted in strong spending for housing and other "big ticket" items. Residential and commercial permitting have been strong in Nevada, including its primary urban areas of Las Vegas and Reno. Though large month-to-month variations have been experienced, the trend has been upward. Since many projects have a longer than average planning period, indications for sustained activity in the year ahead bodes well for sustained expansion.