Housing, credit, and energy, the three major economic problems confronting the U.S. and some states, have taken the steam out of the economy. The impact reminds one of a Caribbean hurricane season hitting the same area more than once and each time spawning tidal surges and killer tornados. Today, we grapple with the economic storms’ aftermath–depreciating housing values, a longer list of troubled financial firms, higher energy prices, worried consumers, and a weakening automobile industry. Still, the U.S. economy has performed better than many expected under the circumstances, but no creditable source finds that the difficulties are over, on the contrary.
Not surprisingly, the four “bubble states,” which includes Nevada, have faced greater difficulties than other parts of the U.S. and find themselves grappling with adversity. This adversity shows clearly in current unemployment rates. The rates for Nevada, Las Vegas, and Reno (6.5, 6.5, and 6.4 percent, respectively) exceed the U.S. unemployment rate. The Silver State rates vaulted to the mid-6 percent range for June with the U.S. rate hovering at 5.7 percent. Moreover, most indicators fall on the negative side. As a result, do not be surprised to see future unemployment rates rising, adding another percent or so to unemployment rates.
Sharp oil-price escalation over the past year, which was taking a larger bite out of consumer pocket books and soured consumer expectations, resulting in less discretionary spending for autos, furniture, and travel, stalled at $145 a barrel recently and has begun to retreat. With crude-oil prices now standing below $120 a barrel, consumers find welcomed relief. Still, even if the energy picture improves further in the months ahead, which we expect, we see no quick close to our other major problems. The Silver State, having enjoyed a record run of economic prosperity, now faces the sobering prospects—a current recession and the chance of tepid conditions on the longer horizon.
In the final analysis, job growth offers the best prospect for filling the currently vacant housing units in the Silver State and turning the corner on the housing problem. And, greater capital adequacy to realign risk exposure will make more credit available once we pass the adjustments. Energy sustainability calls for longer-term actions. In the meantime, more economic bumps may appear, but the chance of their occurrence should ebb over time. Once we pass the difficulties, however, things become more sustainable, though we likely may see more moderate growth.