Business Indicators - May 2010

Business Indicators

by Mary Riddel, PhD

    The US economy continued to expand without adding much in the way of new jobs.  US employment was down by 2.4% over the last year and essentially unchanged from the previous month.  But, there are strong indications that the national economy is primed for employment growth soon.  Productivity, in terms of output per worker, increased at an annual rate of 5.9% in February.  Growth in productivity has outpaced growth in employment costs. In fact, output per worker is at historically high levels, making it very difficult to squeeze more out of the existing workforce without raising costs more.  As such, businesses must hire to accommodate any new increases in demand they experience in the coming months.  It won’t be difficult to find new workers: the unemployment rate in February stood at 9.7%, basically unchanged from January and up significantly from the 8.1% experienced in February 2009.

    We are beginning to see signs of increased consumer spending in the US.  For one, auto and truck sales grew at an annual rate of slightly more than 13% in February.  Still, seasonally adjusted annual sales of autos and light trucks stood at 10.34 million, down significantly from pre-recession levels.  Retail sales are also up in the US, growing by 3.5% from the previous year.  Finally, housing starts saw modest annual growth of 0.2%.  Taken together, these numbers suggest that consumer demand is growing, albeit modestly.

    Unfortunately, Nevada and Clark County have yet to enjoy many of the benefits from increased consumer spending in the US and growing consumer confidence.  In particular, the employment picture remains very bleak.  The unemployment rate stands at 13.9% in Clark County and the Nevada unemployment rate hit 13.7%.  Nevada’s two main industries—construction and gaming & tourism—have yet to rebound. Residential and commercial permitting is flat at a very low level.  In February in Clark County, a scant 484 residential permits were issued.  During the boom years of 2004-2005, it wasn’t unusual to see more than 4,000 permits issued in a month. Gaming is doing a bit better:  visitor volume is up 2.4% and 1.6% from last year in Clark County and the State of Nevada, respectively. Still, hotels have offered deep discounts to attract new visitors, meaning that many hotel & gaming companies have seen profits drift into the red.

    Perhaps the main problem facing both Clark County and the State of Nevada is continued decline in consumer spending.  Taxable sales in the state fell from $3.66 billion in January 2010 to $2.82 billion in February, a dramatic 23% decline.  Clark County didn’t fare much better, with taxable sales down by roughly 20% month over month.  Gaming revenues are starting to recover, but only modest month-over-month improvements have been observed to date.  For example, Clark County gaming revenue grew by 1.5% from January to February of this year, but the series is still down by 2.2% from 2009 levels.  Taken together, this means that Nevada’s fiscal situation continues to worsen.

Mary Riddel, PhD
Mary Riddel, PhD, UNLV Center for Business and Economic Research