Nevada’s economy enjoyed a banner year in 2005. Most industry sectors reported their strongest year yet, and predictions for the future are very positive. Most of the experts interviewed expect bright futures in their industries as population and job growth continue to expand. Rural counties are experiencing healthy economies. Mining and tourism both look good. Nevada’s economy looks healthy across the board.
While there may be a desire to believe that the future will be as good – if not better – than the present, our experts were not afraid to engage in a frank discussion about factors that could derail our economy – from manmade threats like terrorist attacks, to the unpredictable wrath of Mother Nature – because, while we may not get hurricanes in Nevada, we definitely feel their effects on our economy.
“From all our figures, we expect to see a strong economy in Nevada,” said Gov. Guinn. “I think we’re going to continue to far exceed the national economy as the fastest growing state population-wise and certainly one of the best job markets in America. We usually stay in first or second place and have done so for a good many years. I believe we’re going to exceed anything we see on the horizon from a national level, and that’s good for us in many ways; if the national economy takes off, we’ll get even stronger. If the national economy slows down a little, certainly that has an effect on us, but we’ve been strong enough to stay above that, unlike some of the other states.”
Threats to our economy are largely threats to the national economy, from natural disasters like this season’s hurricanes and the resulting rise in petroleum prices and construction materials, to manmade threats, from terrorism to interest rates rising enough to hurt construction and prevent buyers from qualifying for homes.
“Otherwise, I see a pretty steady hand,” said Guinn. “Like the rest of America, we have a lot on our plate, but most of those concerns are allocations of dollars. If we can stay where we are and not have to reassert a national tax, we’ll be in fairly good shape.”
Harry York, Executive Director
Reno/Sparks Chamber of Commerce
Reno is seeing a slight slowdown, both in the residential market and in the number of relocation packets requested from the chamber. But retail follows rooftops, and rooftops are heading downtown into the Reno redevelopment core, where loft and condo projects are luring in retail business.
“I think there’s a lot of confidence in the business side, and the city is going to start to appeal to different kinds of people who will live downtown, either young singles or empty nesters. And they bring money, they bring spendable income, they want lots of activities – not just evening activities. They like to shop at nice places, they want entertainment, plus they have basic needs, like grocery stores and drug stores,” said York, who expects Reno’s economy to stay strong and believes 2006 could be Reno’s strongest year yet in business development.
Kara Kelley, President and CEO
Las Vegas Chamber of Commerce
“Las Vegas is one of the hottest job markets in the country. Nevada alone created 80,000 jobs last year, and 63,000 of them were in Las Vegas,” said Kelley. With expansion, services are sometimes stretched, and for smaller businesses that might mean frustration with local government responsiveness and the time it takes to get permits and licenses. Larger businesses seem focused on infrastructure, land issues and attainable housing. But these concerns are not adversely affecting population and job growth. In 2006 Kelley foresees continued economic health.
Commercial Real Estate (North)
Par Tolles, CCIM, Trammell Crow Company
President, Northern Nevada Chapter CCIM
Retail, industrial and office space are all healthy in Northern Nevada. Rents are starting to rise in response to increased construction and oil costs, but absorption rates in all three market segments are good, both from existing companies and from expanding and new companies. Industrial is picking up with some spec building, and retail and office projects are heading back into downtown. Reno is going vertical, as rising demand for housing leads to condominium projects in downtown Reno’s redevelopment core.
“I think what’s happening both in downtown Reno and downtown Sparks is really exciting,” said Tolles of the mixed-use retail, office and residential projects. “It’s an urban-type development that makes sense for everybody. If people live close to where they work, close to where they shop, that’s good for the environment, good for transportation issues, good for the community.” Tolles expects very aggressive development in 2006 and into 2007.
Commercial Real Estate (South)
Soozi Jones Walker, SJW, CCIM, SIOR, Commercial Executives
President, Southern Nevada Chapter CCIM
With interest rates having been raised 11 times in 12 months, Walker predicts, “Investment properties will not appear as lucrative, the leasing market will tighten up and if the feds don’t start lowering the rates a little, I’m concerned about the short-term economy. I hate to be the doomsayer with that statement.” But with the rise in land costs and construction materials passed on to buyers, Walker is already seeing buyers choosing to lease commercial properties instead of purchasing them.
Tim Rubald, Interim Director of Rural Community Development
Nevada Commission on Economic Development
“If things continue as they’ve started in 2005, it’s going to be very good in 2006,” said Rubald. “Elko, Winnemucca, Lovelock, Hawthorne – all of them have strong projects on the drawing board that should come to fruition in 2006.” Industries strengthening rural Nevada run the gamut from mining to logistics, manufacturing and some of the service and educational industries. Growth in rural Nevada is causing a housing crunch, and some locations in central Nevada are experiencing lower new-business growth because of logistics and distribution, but for the most part, “Everybody is getting a little piece of the action,” said Rubald.
Russ Fields, President
Nevada Mining Association
It’s hard to have a crystal ball when the health of an industry depends on its commodity, but Fields said the last half of 2005 has been extremely good, with gold prices around $470 per ounce. “Everything is on the upward swing. We don’t have any mines closing. Times are good right now,” he said. “But in the mining industry, we try not to get too excited when they’re good and try not to get too depressed when things are bad, because they always change.”
When gold prices are up, mines can afford to stay open once high-yield ore is mined out, because it becomes worthwhile to search for less accessible or lower-yield ore. Currently, mines in Nevada are producing copper and silver as well as gold, and more people are working in the industry than in the last five years. About 11,700 people are directly employed in mining, and Fields said that figure is moving upward.
Ray Bacon, Executive Director
Nevada Manufacturers Association
Bacon expects the manufacturing industry in Nevada to feel the effect of California’s elections in 2006. Companies looking to move when Gray Davis was in office held off when Arnold Schwarzenegger was elected. If the Governator has a rough election, Nevada may see another influx of California businesses.
Meanwhile, Nevada is the only state to show growth in manufacturing jobs in recent years, leading to frustration with Northern Nevada’s workforce, Bacon said. “At this point, if a good candidate walks through the door, the company will hire him.” Fuel and housing costs are both challenging manufacturing, but for the most part, business consumption of capital goods is up and the future looks bright.
Jim Shabi, Economist
Nevada Department of Employment, Training and Rehabilitation (DETR)
Nevada’s post 9/11 economy has seen phenomenal growth in nearly every economic indicator, from job growth to gaming to sales tax numbers, with consistent double-digit growth. Shabi expects the growth rate to slow, but the economy will continue to be driven by Las Vegas and will expand at a much more rapid pace than the nation as a whole.
DETR expects to see 50,000 new jobs in Nevada in 2006 with 4.6 percent job growth for the state and 4.5 percent unemployment. “Overall, Nevada has been leading the nation nearly all of the last 20 years in terms of job and population growth,” said Shabi, “and if we don’t remain number one, we’re certainly going to remain in the top two or three.”
Center for Business and Economic Research (CBER) at UNLV
Dr. Keith Schwer, Director
CBER’s Index of Leading Indicators has shown the national economy to be flat over the last six months, while Southern Nevada has continued to be strong. Schwer anticipates Nevada’s economy will continue to fare somewhat better than the nation’s as we head into 2006, barring unforeseen events. “I think there are more unknowns right now and more points to watch going forward than at any time in the last few years,” he warned. “That doesn’t mean the economy will go south, but that the likelihood of something happening is far greater today than it was in the recent past.”
Bureau of Business and Economic Research UNR
Richard Bartholet, Director of Research Development
Bartholet expects that Nevada’s economy will continue to diversify in 2006, with existing firms expanding and new firms relocating to the state. Two main economic drivers – tourism and gaming – are both changing. Tourism aims to reflect Nevada as an adventure destination and gaming is producing ever-better products in response to Indian gaming. We continue to face the same challenges as the nation, including rising gas prices, but Bartholet expects Nevada’s economy will fare a little better than the national, due to our strong growth.
Residential Real Estate (North)
President, 2005, Reno/Sparks Association of Realtors
Northern Nevada’s housing market is very stable, but after 2004’s feeding frenzy of home buying, demand has leveled off a bit, or maybe supply has just caught up. Minassian doesn’t expect the housing market to remain as strong as it’s been. One indicator, he said, is that housing developers are beginning to work with Realtors again. When demand was at its peak in 2004, developers had waiting lists and didn’t need Realtors.
Residential Real Estate (South)
President, Homebuilders Research
Smith predicts new home sales of 34,000 in Southern Nevada in 2006, including apartment conversions. He expects the market overall will be steady, not increasing or decreasing drastically. “In the middle of the year we’ve got a new chairman with the Federal Reserve, who I think will gradually try to make his mark, and we’ll see what happens with interest rates,” said Smith. “But it’s really up in the air in terms of what he’s going to do with rates by the end of next year. That will have a big effect on the investment dollars available in places like Las Vegas. Overall, I see the market as being fairly steady.”
Bruce Bommarito, Executive Director
Nevada Commission on Tourism
“Overall the Nevada economy is very strong and tourism is a very, very large part of our economy,” noted Bommarito. “Over 50.5 million tourists visited Nevada last year – our best year so far – and we’re on track to beat that this year.” Nevada’s move from a strictly gaming image to an adventure place has boosted tourism, and Nevada is becoming known for shopping, and for restaurants in Las Vegas. In addition, Chinese travelers are becoming a huge part of the tourism market; 93 percent of Chinese who leave China for vacations include Nevada in their travel. Nevada is the only U.S. state to receive an outbound destination marketing license from the government of China and maintains an office there. Nevertheless, gas prices and terrorist attacks remain threats to Nevada’s tourism. “9/11 was really a lesson for our state, when tourism basically stopped and the impact on our economy was dramatic,” recalled Bommarito.
Bill Welch, President
Nevada Hospital Association
Hospitals are a critical component in a viable, strong, growing economy and have a positive impact on Nevada’s economy through the suppliers they contract with and the trained, well-paid personnel they bring into communities. Welch expects to see a continued demand for services throughout 2006 and an ongoing challenge for hospitals to keep pace with demand.
“As long as we have economic growth and growth in population, the medical community will respond,” said Welch. “If we were in a stagnant economy and very highly uninsured – worse than what we are – the industry would be committed to a level of services, but not invested in building all the new hospitals that are coming in.”
William Uffelman, President and CEO
Nevada Bankers Association
The housing market is slowing, so real estate lending is slowing, but the banking industry is still expanding in Nevada. Branches are still opening despite the $7,000-per-branch tax passed by the last Legislature. “Seven thousand dollars is the cost of doing business as any particular branch,” said Uffelman. “It’s not overwhelming, it’s just $7,000 that isn’t available for healthcare costs, for lending, for other things. I’m not aware of any other business that has to, in effect, plunk down $7,000 before any other costs are added, as a privilege for opening their doors.” Banks continue to form and to open branches, however, and likely will until the industry hits saturation.
Nevada Commission on Economic Development
Verlyn Miller, Vice Chairman
“Economic development activity is probably as strong currently as it has ever been, and looks to be that way for the next year,” said Miller. “I anticipate 2006 will be very strong and very positive. We still have a great number of companies from California looking to come in because of problems with workmans’ compensation and the cost of doing business in California. We’ve got all of our regional economic development authorities in Reno, Las Vegas and rural counties working with large numbers of clients. The Nevada Commission on Economic Development has been very active the last several months and we anticipate we will continue to be so.”
Last year’s economic forecast article predicted 2005 would be a vintage year for Nevada’s economy, and the predictions came true. This year we’re faced with a few more variables – uncertainties from natural disasters to terrorist threats to gas prices – but for now, Nevada’s economic future looks bright and Nevada’s economic leaders are working to keep it that way.