Business Indicators - March 2003

Business Indicators

by R. Keith Schwer

Consumer confidence measures continue to trend downward, business expansion plans remain on hold and price/earnings ratios remain high – all signs of economic weakness. Still, consumer spending continues to trend upward, particularly housing. Low mortgage rates and past wealth accumulations have spurred the housing market. Without a robust housing market, the recession that began in March 2001 would have been more severe. As a result, overall economic conditions for early 2003 remain brighter than what might be expected, given the long list of problems that have befallen the U.S. economy and the weaknesses that continue.

The long expansion of the ’90s created an overhang of weakness. Bankruptcies and business consolidations will need to leave firms more efficient before sustainable upward expansion occurs. Financial difficulties have sent federal regulators into the fray to reestablish rules of business activity. Indeed, rebuilding of investor confidence is a high priority for future growth.

By historical standards, it is highly likely the recession that began in March 2001 is over. Only employment, one of the four key series used to date business-cycle peaks and troughs, has failed to push beyond the last peak. Moreover, it is highly probable employment growth will remain weak, at least during the first half of 2003.

Even with generally mild recession, state finances have weakened considerably. Nevada is not alone in having difficulty; most states are having financial problems. Faced with rising state deficits, discussion of tax and expenditure issues again brings Nevadans to the importance of economic issues in their lives. Out of the process of facing the state fiscal imbalance, Nevadans will again go about setting state priorities. In the end, the importance of creating economic opportunity for themselves and future Nevadans should be high on the list of objectives.