Economic hardship continues, even as pundits seek to find every glimpse of improvement ahead—referred to as “green shoots.” Nevada, Clark County, and Washoe County posted unemployment rates well above the national level, jumping significantly for June with the rates reaching 12.1, 12.3, and 11.8 percent, respectively. Such numbers put the Silver State among the worst-hit states. The U.S. rate is 9.5 percent—better than in Nevada.
Comparing the Nevada, Clark County, and Washoe County indicators on a same-month year-ago basis, we see all the indicators showing things worse now in Nevada than they were a year ago, except a small rise in gasoline sales in Washoe County. Clearly, the Silver State has been harder hit than other areas of the U.S. during this downturn. Moreover, unemployment rates tend to rise after an economy hits the bottom of the business cycle, suggesting that we see prospects for further difficulty ahead.
Comparing recent growth rates measured month-to-month and annual trend rates measured on a same month year-ago basis, however, offers some signs of hope that we may shortly see the beginning of a recovery. Retail sales growth and housing starts show recent positive signs while the trend over the past year is negative. Also, auto- and truck-sales data, coming before the “clunker” rebate program, show a double-digit decline on a trend basis and a modest one-month decline. All indications point to higher sales in July with the “clunker” rebate, however. A turnaround in consumer spending could help revive the national economy.
Past recessions show wide swings in recoveries—some of which can be easily described by the letters V, W, or L. Most recessions and recoveries show a V shape—a strong uptake once recovery starts. Our current financial regulation problems make this less likely. The W shape occurred during the turbulence of the early 80s, a period of substantial adversity not unlike the current one. This approach calls for a recession to closely follow the recovery. The debate here will be on whether the stimulus is cut off too early or the Fed raises interest rates ahead of a full recovery. The L shape is one of a languishing economy not fully recovering and lacking good growth fundamentals—this may well be the case for Nevada given the state’s reliance on discretionary spending and the overhang of housing.