Business Indicators - December 2008

Business Indicators

by R. Keith Schwer

The consequences of earlier actions are making themselves felt. The excesses of the past have seeded a series of recent bewildering events. At a time in which order, discernment, agreement, and guidance were called for, policy making in Washington took a series of awkward turns. Some were numbed to see cliff-diving devaluation biting into asset values, leaving a trail of bitterness and disappointment. But, all might have joined in the refrain: “It’s the economy stupid.”

The news about Nevada’s job picture continues to deteriorate as unemployment rates continue to rise. The Nevada unemployment rate trended up to 7.2 percent compared with 6.1 percent nationally. What a difference a year makes. The unemployment rate levels rose by 2.2 percent for the Silver State, 2.3 percent for Las Vegas and 2.2 percent for Reno. The slowdown in construction jobs largely explains most of the recent losses. Yet, weak job conditions are now appearing more frequently in other business areas. Frozen credit markets, empty housing units and declining wealth leave one failing to see a speedy resolution to current conditions.

State data uniformly falls on the negative side when measured for the same month the previous year. Visitor volume and gaming activity, a household discretionary item, are down. Taxable sales show declines, measured either on a month-to-month basis or the same month a year ago. Declining sales result in lower total paychecks. Lower paychecks result in less income working through other parts of Nevada’s economy.

Consumers, the largest spending group in the national income accounts, express less confidence in their future economic conditions. Consumers make up approximately 70 percent of total national spending and they are cutting back on large ticket items. Most notably, U.S. auto and truck sales are down 22.7 percent from the year prior. Housing starts are down 31.1 percent as are retail sales which are down 1.0 percent. This information suggests a weak second half for 2008 and start for 2009. It is hard to believe that confidence will quickly return for consumers and investors without addressing the many weaknesses that have arisen during the past excesses. These weaknesses are not likely to be quickly corrected, suggesting that 2009 will be by and large a down year.