The US economy began to pick up in the third quarter. Gross domestic product, the measure of all goods and services produced in the US, grew at a rate of 2.8 percent. This came after four straight quarters of contraction in the US economy. Although the National Bureau of Economic Research has yet to declare an end to the recession, most economists agree that the recession is over and the US will continue to enjoy a modest economic expansion in coming quarters.
Nevada has lagged the US expansion and it is likely to be some time before economic indicators improve. Unemployment stood at 12.6 percent in October, down 1 percent over the previous month. This statistic does not suggest an improvement in labor market conditions. Rather, discouraged workers are leaving the labor force. At present, Nevada’s unemployment rate is higher than every other state save Michigan.
Unfortunately, there are few bright spots on the economic horizon. Virtually every indicator of economic vitality is down in the state. Gaming revenue, taxable sales, and sales of gasoline are all down significantly over the previous year. Since these sectors account for more than 70 percent of state tax revenues, the state’s fiscal picture is bleak.
Clark County is performing somewhat worse than the state. Unemployment fell from 13.9 percent in September to 13 percent in October, but again this reflects workers exiting the labor force. Permits for commercial building are down almost 60 percent from the previous year and residential permitting is flat, with roughly 500 residential permits per month issued in 2009. These statistics do not bode well for the future of construction employment. We expect the recent layoffs in the construction sector to continue in Clark County over the coming year.
The modest recent improvement in the US economy has meant that visitor volumes are up slightly in Clark County. Even with the increase in the visitor count, gaming revenue is off over 11 percent from October 2008, indicating that gaming revenue per visitor is down significantly. Apparently, budget-minded travelers are spending less in casinos than in the past. The opening of CityCenter in December is likely to exacerbate rather than improve the situation. Although CityCenter has enjoyed excellent publicity and is rumored to have healthy bookings well into 2010, many of these bookings likely came at the expense of other properties. We project that increased competition will lead to even more discounting in Clark County hotel room rates. Discounts will attract a stingier traveler, and we are not likely to see a rebound in gaming revenues per visitor soon.
Mary Riddel, PhD
UNLV Center for Business and Economic Research