Business Indicators - May 2007

Business Indicators

by R. Keith Schwer

Some softening is apparent for Las Vegas and Reno in the recent indicators, though overall conditions remain favorable. The number of jobs is down for January 2007 in both Las Vegas and Reno, 1.3 and 2.8 percents, respectively. Job growth for January 2007 is up by more than 3 percent, however.

Still unemployment rates remain below 5 percent. These rates are 4.7 for Las Vegas and 5.0 for Reno. In comparison, the U.S. unemployment rate holds at 4.5 percent. Since Nevada rates have been below the U.S. rate for sometime, it remains too early to conclude that there is a structural shift underway--it is simply too early. Anecdotal evidence, however, suggests otherwise, as overall conditions remain favorable in the Silver State.

Most likely, the recent shift to slower job growth in Nevada can be largely attributed to marked declines in new-home construction. New-home permitting is down sharply since midyear 2006. Permitting was down 56.1 percent for Las Vegas and 47.4 percent for Reno, measured for February on a seasonally adjusted basis. Clearly, housing imbalances in the Silver State are being corrected.

Spending activity continues in Nevada at a high level, though month-to-month changes remain small. Gaming revenue is off slightly and taxable sales are up slightly. The substantial adjustments underway in the Nevada residential-construction market have not been a big drag on other sectors of the economy. Similar adjustments are underway elsewhere in the U.S. In some regions, however, conditions are decidedly weaker than in Nevada, for example, in states where housing and manufacturing are both down. Still, the likelihood of a national downturn remains markedly less than the likelihood of continued growth, even if at slower rates than recently experienced.