The US economy has posted several quarters of solid growth in gross domestic product. Most of that growth has been driven by consumption spending and firms restocking inventories, although business investment in equipment and software made a strong showing in the first quarter of 2010. Still, there is evidence of continued weakness in the US economy. The May 2010 employment report indicated that the economy had created 431,000 jobs. Unfortunately, 411,000 of the jobs are temporary federal government jobs related to the 2010 Census. The economy created a scant 41,000 private-sector jobs, well below the 218,000 private-sector job gains in April. Economists were quite disappointed by the report, since many projected private-employment growth in the range of 200,000 to 300,000 jobs. The May retail-sales report was also disturbing: May retail sales actually fell over April sales, the first drop reported since the beginning of the economic recovery in September 2010. These two statistics may be aberrations, but we will continue to monitor the US recovery over the summer. Another drop in retail sales or employment may suggest that the economy is losing traction and more stimulus measures may be needed to keep the recovery on track.
Nevada continues to lag the US recovery. The unemployment rate in the state stands at 13.8 percent, up 2.6 percent from only a year ago. Job creation remains elusive and the state has lost 31,900 jobs in just the past year. Taxable sales were higher in May than in April, but still down 7.4 percent from the previous May. Gaming revenue fell 5.7 percent from the previous year. Taken together, taxable sales and gaming revenue account for more than two-thirds of the state budget, and continued declines in these revenues indicate that the state’s fiscal picture will not improve anytime soon.
The picture is even bleaker in Clark County where virtually every statistic we track deteriorated. The unemployment rate topped 14 percent with Clark County losing 30,700 jobs just in the past year. Taxable sales fell 9.4 percent over 2009 levels and gaming revenue was off 6.1 percent. Residential permitting is frozen below 500 permits a month. Visitor volume fell by 1.3 percent in April over May levels and is basically flat when compared to visitor volume in April of last year. The only indicator that posted a positive annual gain is commercial-permitting activity. Still, the 37 percent increase in commercial-permitting activity represents a gain of only 7 permits. This is hardly an indication that the local economy is improving.
We continue to be very concerned about the local economy. The large overhang in residential and commercial investment means that the construction sector is very unlikely to improve in the coming months. The industry that will lead the recovery is hotel and gaming, but that sector continues to show weak progress. Until the US economy creates a significant number of jobs and disposable income, the Southern Nevada economy will remain on the ropes.