The November and December indicators show an economy caught in a firestorm—an uncontrolled self-reinforcing decline in which job layoffs create further job losses. A sustaining economic firestorm shows in the preponderance of double-digit percentage declines from year-ago levels. The severity of the contraction shows in sharp cuts in consumer spending.
The Nevada unemployment rate stands at 9 percent, up from 5.6 percent in one year. The rates for Washoe and Clark Counties stand at 9.1 and 9.0 percent, respectively. These rates exceed the U.S. rate of 7.6 percent. Further increases can be expected.
The largest spending declines in the current recession include housing, automobile sales and travel and tourism. In a consumer-lead recession one often sees fewer big-ticket purchases and less discretionary spending. Nationally, we see U.S. housing starts down 45 percent and car sales down 37.6 percent from year-ago levels. Big ticket sales are also down in the Silver State. Essential things, such as gasoline, are also down—sales have declined 7.7 percent for Clark County and 10.3 percent for Washoe County. These year-over-year declines occurred even after gasoline prices returned to previous levels.
Residential construction got ahead of itself during the housing-bubble period—producing too many units. The excess of vacancies has put housing construction into a lull, as shown in a comparison of recent residential construction permits issued with year-ago levels. Housing excesses often take time for construction cutbacks as we now see. Housing permitting has declined by 38.7 and 67.6 percent for Clark and Washoe Counties respectively. A turnaround in housing construction awaits the concurrent improvement in housing affordability, mortgage credit and a stable job environment.
The current business conditions have a parallel in the recent Australian bushfires, but these conditions also show that it is difficult to sustain such a conflagration. As such, the percentage decline in the current Silver State data may be near the maximum. To be sure, we may still see future declines, but the economy may start to show a bottom if national spending returns with increased fiscal stimulus, monetary and financial reforms, and a return to healthier credit markets. Just as a firestorm runs out of fuel and oxygen to sustain it, so it is that bad recessions run out of jobs to lose. Moreover, the season of fire will be followed by recovery. We just do not know at this time when this will occur, however.