Business Indicators - December 2004

Business Indicators

by R. Keith Schwer

U.S. economic expansion slowed at mid-year, largely as a result of rising fuel prices, which rose 30 percent this year as a result of reduced supply, increased demand and the prospect of future shortages and markedly higher prices. Still, current oil prices in excess of $50 a barrel are lower today than in 1980, when a barrel of oil cost more than $80 in today’s money. Based on past experience, it will take further fuel-price increases to push the current expansion into a recession. Still, the recent price increases are reason to trim growth forecasts by fractions of a percent.

U.S. employment growth has been anemic since November 2001, the date of the bottom of the last recession and the beginning of the current expansion, but job growth has picked up during the past year at an annual rate of 1.3 percent. However, job growth must exceed 1.3 percent (the annual rate of growth in the working-age population) before the uncertainty that has clouded business investment will be pushed to the sidelines. Continued economic expansion with sustained demand prospects will be required to generate additional job growth and to improve labor-market conditions.

Economic conditions in Nevada, as measured by job growth, have been better than for the nation. Job growth over the past 12 months was up 4.3 percent, 4.7 percent and 3.8 percent for Nevada, Las Vegas and Reno, respectively. Other economic sectors in the Silver State have also experienced expansion. In Las Vegas, gaming revenue and taxable sales are up by double digits over a year ago. In Reno, gaming revenue is down at an annual rate of 4.8 percent, but taxable sales are up 10.1 percent over a year ago.

Both Las Vegas and Reno continue to experience strong housing markets. Sharp increases in metal prices have lifted the fortunes of rural Nevada. All regions of the Silver State are prospering.