Declining business investment and manufacturing production brought the longest U.S. expansion on record to a close in March 2001. Before 2001 ended, however, the economy showed signs of a rebound. Indeed, there was only one quarter of decline in GDP, the third quarter of 2001, though the rule-of-thumb is that it takes two quarters of decline for a recession. Strong growth for the fourth quarter 2001 and first quarter 2002 with only one quarter of decline reveal a very mild recession with a quick recovery. The quick recovery and the failure to meet the rule-of-thumb of two quarters of decline for a recession have some arguing that we experienced a slowdown and not a recession.
Primary factors for this unusual but welcome outcome include continued strong consumer spending and robust worker productivity. These two economic dimensions usually decline during a recession, but they continued to trend upward during 2001 and into 2002. To be sure, price-incentives programs for autos and other consumer-durable expenditure categories helped. In addition, housing construction and related expenditures remained strong, reflective of demographic changes, lower mortgage rates and available financial resources. Though a strong consumer sector has softened the recession, sustained expansion will require increased investment spending above the lower levels of 2001.
With economic expansion underway during 2002, not all economic sectors will post strong improvement, however. For one, unemployment tends to recover later than other sectors during recovery and expansion. The unemployment rate reached 6.0 percent nationally for April, up from the mid-4 percent range only a year ago. The March unemployment rate showed 5.7 percent, 5.7 percent, and 5.0 percent for Nevada, Clark County and Washoe County, respectively.
Other Silver State indicators show softness, at least in comparison with year-ago levels. Passenger traffic remained down and taxable sales and employment growth were flat. Gaming revenues, however, were up over year-ago levels for February. However, this growth is due primarily to a rise in special events attendance, since overall gaming revenue remains in decline measured on a year-to-date basis.
The outlook for travel and tourism activity is likely to remain guarded in the months ahead. Even though the majority of economic indicators now point toward recovery, corporate-profit expectations continue to be flat – a condition that is likely to keep business travel down. All in all, 2002 shapes up as a year of growth.