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You are here: Home / Uncategorized / Work in Progress: An Update on Employment in Nevada

Work in Progress: An Update on Employment in Nevada

February 22, 2011 By Jessica Santina Leave a Comment

It seems like just yesterday that Nevada was the land of opportunity—the fastest growing state in the nation, with one of the healthiest economies. But the recession has created a vacuum that has given Nevada the highest unemployment rate in the country; at 14.3 percent in November, our rate was 2 points higher than even woebegone Michigan. The Silver State is officially the last place you’d come looking for work.

Some Jobs Are Hot… Some Are Not

A closer look at Nevada’s numbers reveal some interesting truths. According to 10-year industry employment projections for 2008-2018, released by the Nevada Workforce Informer, the research and analysis arm of the Nevada Department of Employment, Training and Rehabilitation (DETR), there are actually more bright spots than dark ones on the horizon, in terms of job growth. Industries experiencing the greatest declines for this period are the usual suspects: building and construction (especially in subdivisions and commercial buildings) by up to one-third of its workforce; real estate; motor vehicle parts manufacturing; and publishing.

Yet remarkable growth—in some cases by up to one-third or more of the current workforce in those industries—is expected in mining; manufacturing (from food to plastics, metals, machinery and paper); wholesalers and retailers of clothing, shoes, appliances and electronics; civil engineering and road construction; Internet and data services, including systems and tech support (by as much as 50 percent); financial services; educational support services (by nearly 60 percent); and independent artists, writers and performers.

So, with such great demand in some areas, and such high unemployment in others, it’s clear that there’s a workforce disconnect in the state. So what’s being done to address it? What’s on the horizon for Nevada’s unemployed?

Prognosis: Stable

According to DETR’s chief economist, Bill Anderson, the best that can be said about employment in Nevada is that it’s stopped free-falling. “Unfortunately, it’s stabilizing at a level that by Nevada standards is quite weak,” says Anderson. “We still have the highest unemployment rate in the nation, and we continue to see job and employment readings declining. But if you look at the unemployment rate over the course of the last six months, it has leveled off and hovered in the narrow range between 14.2 and 14.4 percent.”

He adds that, with respect to the employment picture, job levels are still falling, but not at the tremendous rates we saw in 2009, at the height of the recession.

Jeremy Aguero, principal analyst with Applied Analysis, an economic fiscal policy research firm based in Las Vegas, adds that 1 in every 3 workers collecting unemployment right now came from the construction industry.

“We had 12.5 percent of our workforce in construction, while the national average was 5-6 percent,” Aguero says. That, he adds, is why Nevada enjoyed such prosperity prior to the recession.

“If you’d asked me a few years ago whether I thought we’d have the highest unemployment in the nation, I might have chuckled,” says Anderson.

Yet here we are, and that unemployment is wreaking havoc on state revenues, our budget deficit and businesses as well.

“We’re really concerned about unemployment costs. We’re seeing double-digit increases,” says Shelly Brady, human resources manager for Southern Nevada’s Managed Business Services. Also known as Managed Pay, the company handles HR functions and payroll for hundreds of clients in Southern Nevada. Brady refers to unemployment taxes charged to Nevada employers, which, effective January 1, increased from 1.33 percent to 2 percent, nearly doubling the amount of money generated to cover the unemployed from $273 million to $410 million for 2011.

And, as Anderson points out, this still doesn’t cover the debt Nevada has incurred in borrowing from the federal government to pay unemployment benefits. To date, Nevada has borrowed $628 million; interest began accruing at the first of the year, and we’re still borrowing. The first payment is due on Sept. 30, 2011.

Yet Nevada certainly isn’t unique. “This is an issue being faced across the country,” says Anderson, “and it’s a policy question we’re going to have to get an answer for.”

Lawmakers Have Their Hands Full

Few Nevadans are envious of the task before lawmakers going into this month’s legislative session. In addition to wrestling with a two-year budget deficit that comes to roughly $3 billion, they’re also charged with addressing how to get Nevadans back to work.

“I have to tell you, there are about a hundred ideas coming to the legislature this session,” says Aguero. “Our governor says [unemployment] will be the most important thing to him. Legislators, such as Assemblywoman Marilyn Kirkpatrick in particular, have several initiatives aimed at making renewable energy a priority, improving public/private partnerships, indexing the gas tax, and on and on. There are dozens aimed at nothing more than putting folks back to work.”

There’s also increasing talk of dedicating more state resources to economic development, and to eliminating the modified business tax, which in Nevada is applied to business taxes on payroll, and which, after sunsetting this year, would not be renewed. This is meant to incentivize hiring out-of-work Nevadans.  “This is met with skepticism because it’s probably not going to be enough of an incentive to encourage an employer to hire someone,” said Aguero.

The Employer-Employee Disconnect

Applied Companies, based in Northern Nevada, operates three businesses under its umbrella: a temporary staffing firm; an executive search firm and a professional employer organization. President and CEO Jim Annis says that while numerous employers went out of business last year, Applied Companies saw their business exploding in 2010, which he attributes to two things.

“First, we employed a contrarian view. When the recession hit, many companies closed or cut back on their sales and marketing dollars. But we expanded them, and didn’t lay off anyone,” says Annis. “In 2010, the market picked up a little, and because we’d planted these seeds for two years, we were able to increase our market share.

“Second, as business was improving in 2010, no one was ready to hire full-time people. So it was a double-edged sword. Our business exploded, but not for a good reason, because it meant that employers didn’t have confidence enough to hire full-time people.”

Annis adds that his company is seeing hundreds of unique individuals coming in each week, looking for work. “Whereas five years ago, we turned down business because we couldn’t place qualified people, now we’re seeing many qualified people for positions we have.” He points out that this is partially because Applied Companies handle light industrial and clerical, as opposed to construction.

Also, since  businesses paid additional payroll taxes in 2010, employers have been reluctant to hire full-timers, which leads to greater temporary placement on the staffing side, and have cut back on administrative jobs, which benefits the PEO business. “That’s good for us, but it’s actually bad for the general state of the economy,” says Annis.

However, he’s quick to point out, that business is up on the executive search side as well, in renewable energy, sales and marketing, and recruits are coming from both inside and outside Nevada.

Brady says that Managed Pay is seeing the same trends in Southern Nevada. “You’ve got high-level people, very highly qualified, looking for just anything, wanting any job, even if it’s not in their field, just to be working,” she says.

“The real challenge, statewide, is that we’ve had something like 120,000 construction jobs go away,” Annis adds. “Framers were making $25 an hour and now we’re trying to get them to accept a warehouse jobs for $12 an hour. That’s a real dilemma.”

Earnings are also an issue, because incomes are disproportionate to housing costs, Aguero says. “If you look at wage and salary data and how it’s changed, aggregate wages paid to workers and per capita incomes have slid for the last two years.” The Bureau of Economic Analysis’ report, “State Personal Income: Third Quarter 2010,” shows that Nevada’s personal income ranks 48th in the nation.

So, then, where are all these jobs that DETR reports are growi ng? What of the disparity between employer needs and workforce qualifications?

Tom Harris, state economic specialist with the University of Nevada Cooperative Extension, and director of the UNR of lenders will start foreclosure if you go into default. Seventy to 80 percent have taken a very hard line approach and refused to negotiate.”

Whatever route the borrower eventually takes, the importance of having a plan can’t be over-emphasized. “The sophisticated debtor will go into bankruptcy with a plan to get out of it,” Olson explains. Formulating the plan also involves professional assistance. “They need to get help before it’s too late. Sooner is better,” Chubb says.

Greene says it’s critical to get an attorney on board right away. “I would advise people to hire an attorney first. As soon as you figure out that the project isn’t cash flowing, get professional help right away. You need to analyze your options,” he explains. Waiting too long will only make matters worse by limiting options. “Unfortunately a lot of companies are in denial,” Olson says. “One of the things that doom bankruptcy to failure is that the company waits until it’s too late. A lot of people file for bankruptcy right before the foreclosure sale.”

Owners of businesses that cannot meet their financial obligations would be wise to view their situation realistically. “I think somebody who is in financial difficulty should take the problem head-on. I’d caution not to take money out of an IRA or personal assets to make it work,” Greene advises. In these difficult economic times, even business owners who are able to make their payments would be wise to look at their financial situation with an objective viewpoint. “They should make sure they are minimally leveraged and that they realistically estimate income and expenses,” Olson says.

For the professionals who are in the bankruptcy trench day after day, the process can be both challenging and rewarding. “The most challenging part is managing people’s expectations. Some people have given up hope and other people are optimistic and think that the white knight is around the corner,” Olson says. “The most rewarding part is taking a business that’s not doing so well and helping the owners turn it around.”

Unfortunately, recent economic statistics indicate that business is likely to remain brisk at the U.S. Bankruptcy Court in Nevada, at least into the near future. The good news is that from the third quarter 2010 to the third quarter of 2011, Nevada is expected to gain 23,906 non-farm jobs for an increase of 2.1 percent, according to the U.S. Bureau of Labor Statistics. Reno will enjoy a bump of 2.1 percent and Las Vegas 3.2 percent.

As long as business vacancy rates remain high, Greene says it will be difficult for the economy to turn around. “There’s too much inventory now. It will take a long time for that to be absorbed. We’ll need 85 to 90 percent occupancy for rental rates to go up,” he says. Low rental rates increase the likelihood of more bankruptcies as property owners find it more difficult to service their loans. Olson believes that many more bankruptcies are yet to come because lenders still have a lot of bad loans they have not foreclosed on. “It’s called amend, extend and pretend,” he says. “I don’t think we’ll see the number of filings slow down yet.”

Filed Under: Uncategorized

Paul Krakovitz: Intermountain Healthcare

Edward Vance: EV&A Architects

Scott Arkills: Silver State Schools Credit Union

Tonya Ruby: Cox Media Las Vegas

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