Business Indicators - April 2005

Business Indicators

by R. Keith Schwer

After a belated delay, the U.S. job recovery from the 2001 recession became evident in late 2004. The recovery showed up much later than many expected based on past experience. Without a clear recovery in jobs, there remained an uneasiness about the sustainability of the ongoing expansion. At the end of the year, the annual growth rate in jobs showed a 1.7 percent increase from December 2003 to December 2004, leaving a clear view of expansion in all of the major economic measures: sales, income and jobs.

The recent job numbers confirm what we have known for some time when considering spending and income data. That is, the 2001 recession was short and mild and the subsequent recovery was also mild, but longer. The economy has moved out of recovery and into expansion.

Sustaining economic performance ahead rests on continued strength in consumer spending for big-ticket items, such as cars, homes and home furnishings, as well as for lower-priced retail items. To date, consumer spending has been strong. But, business spending has not returned to past growth levels; it has been the weakest component of the economy. A litany of difficulties, from a high-tech bubble to sharp price rises in oil, has kept business investment soft. A marked improvement in capital spending by businesses is expected at this stage of expansion.

Major risks for the year ahead include upward swings in oil and fuel prices, continuing rise in the U.S. trade balance, and instability associated with continued terrorist threats. Risks to the Nevada economy rest on things that could adversely affect tourism and mining.

Nevada continues to post strong job growth. Favorable commodity prices will continue to bring prosperity to rural Nevada in 2005. All evidence points to yet another good year in 2005, even if growth rates don’t measure up to 2004 levels.