Clouds of uncertainty continue — some indicators showing weakness and others holding at favorable levels. Signs of weakness in the national economy include stock-market prices, down from the peak of a year ago; emerging concern about future disruptions in the supply of energy; and some manufacturing and dot-com layoffs. Some hype has been generated about declining financial markets, to be sure, but one can readily see how recent concerns can play into a more adverse scenario. Still, these weaknesses have failed to spill over into other healthy economic sectors. All in all, growth continues at modest rates, and it is most likely that the current momentum will be sustained with slow rates of expansion — unemployment rates should trend upward in the months ahead.
In Nevada, the gaming sector in Southern Nevada has no new property openings to market. In addition, tourism in Reno has been stereotyped as likely to be adversely affected by increased competition from new venues. As such, the outlook for gaming revenue in 2001 is for modest growth. In January, gaming revenue was up 6.0 percent over the same month a year ago in Clark County, but down 9.1 percent for Washoe County. The outlook for slower U.S. growth in 2001 and the possibility of disruptions in the California economy have rightfully increased concern about future conditions in Nevada. The most discernible signs point to sluggish conditions.
Beginning in early January, the Federal Reserve Board set a policy of easing monetary policy by reducing two key interest rates. The federal funds rate (what banks charge each other) has decreased from 6.5 percent to 5.0 percent. The discount rate (what the Fed charges banks) has also dropped, down from 6.0 percent to 4.5 percent. Any strong decline in jobs in the near term is likely to be a credible sign to the Fed and the basis for further rate cuts.
Sluggish U.S. economic conditions could well leave Nevada managers facing a new set of conditions. The last recession, a mild downturn in 1991-1992 that lasted three quarters, came and went amid the Gulf War and left minimal adversity in the Silver State. One has to go back to the early 1980s for the last credible recession — a full two decades. If bad news on financial markets washes across other key sectors, then further erosion could drag overall spending down. Should this occur, a new generation will learn all about the contraction phase of the business cycle, which some had incorrectly pronounced to be dead.