According to experts, the outlook for Nevada’s economy this year is positive and projected to fare at least as well as it did, or perhaps even better, in 2018. However, one or more known or unknown wild cards could have a dampening effect.
Some of the indicators that support the forecast in Southern Nevada include strong employment and population growth, robust consumer spending, increasing personal income and high taxable sales.
“We do expect continued expansion going into 2019,” said Jeremy Aguero, principal analyst, Applied Analysis, a Las Vegas-based research firm.
The main catalyst for 2019 will still be visitors and stability in the region’s tourism industry, as it represents 30 percent of the local economy. Another influencing factor is growth in the autonomous vehicles field, and perhaps we’ll see some of them on the streets. A third is continued and unhampered construction of the $23 billion worth of projects—resort, entertainment and transportation—in the pipeline.
“Its success in terms of being able to attract sufficient workers and maintain the timeline will be important to our economy overall,” said Aguero.
As for Northern Nevada, the economy should remain steady with job growth, its primary driver for the past four years, and employment continuing to look strong, said Brian Bonnenfant, project manager, University of Nevada, Reno’s Center for Regional Studies.
A key influential factor in 2019 will be access to financing. If it continues to be accessible, the economy should keep humming along as it did in 2018. If, on the other hand, lending tightens, which would be reflected in capital expenditure numbers, then that likely would slow the economy.
For Nevada as a whole, the national economy’s health, currently robust and expected to keep growing, will play a key role. However, federal and international uncertainties could have a weakening effect on the U.S. economy and, therefore, the Silver State’s. Those wild cards include what might happen with interest rates, tariffs, trade, durable goods orders, investments and home construction and sales.
A significant statewide unknown is what will happen as a result of the changes and new political makeup of the Nevada leadership at the state and legislative levels, particularly with respect to taxes and regulations.
“What develops as a result of that is going to be extremely important, not only to 2019 but probably well into the future,” Aguero said.
Also on Nevadans’ minds is the worry another recession will come. The question is, when?
Out of all the U.S. states in recent years, Nevada has experienced the greatest employment growth, and it continues to look favorable, Aguero said. However, because that expansion rate isn’t sustainable, unemployment should see some “settling.”
A problem that’s expected to persist in Southern Nevada this year is the lack of available, qualified employees to fill the open jobs in certain sectors, such as construction/skilled trades, healthcare and technology. Despite that challenge, the unemployment rate in the Las Vegas metropolitan statistical area was 4.4 percent at October’s end, according to Applied Analysis data. That number could, and likely will, decrease in 2019, but only slightly, said Dr. Stephen Miller, professor and director, the University of Las Vegas, Nevada’s Center for Business and Economic Research.
Northern Nevada should see another 9,000 to 10,000 jobs added this year, Bonnenfant added, making it the fifth year of solid job growth. This is against a backdrop of a less than 4 percent unemployment rate. For Washoe County, it was 3.3 percent in October, according to the Nevada Department of Employment Training and Rehabilitation (DETR). Yet, if housing availability and affordability continue to be challenges, those could also shift job growth to cities outside of Reno-Sparks with lower-cost residential options, such as Fernley and Dayton, and/or mute job and employment expansion.
For Southern Nevada tourism, on the heels of a year of softening visitor totals, 2019, “will be a solid year with some growth,” assuming the national economy remains strong, indicated Steve Hill, CEO of the Las Vegas Convention and Visitors Authority (LVCVA). Bolstering this statement are, in part, the Area 51 convention facility debut and new attractions such as the Las Vegas Ballpark and Kind Heaven. In addition, The Park Vegas and the Palms Casino Resort will be open fully this year and the effects of the 1 October mass shooting are diminishing.
Further, the influx of international tourists into the region continues to grow, and that’s expected to continue. However, negative sentiment toward the U.S. in other countries could result in a decline in international tourism.
As for the region’s other tourism segments, demand for meetings, small to large, in the destination remains robust and 2019’s convention calendar is already more full than 2018’s. The number of domestic visitors who fly into the area keeps expanding, and that trend should continue. McCarran International Airport had the most passengers ever pass through it in October. The drive-in market, though, is showing some weakness, which the LVCVA plans to investigate and counter.
This year will also be one of transition and transformation for tourism, Hill added, as construction and other preparations occur for delivery in 2020 and 2021 of some major projects to the entertainment, meeting and hospitality landscape. Southern Nevada tourism could suffer from people putting off visits until, say, the Raiders start to play in Vegas, Aguero warned.
“But we’re relatively bullish going into 2019 relative to what we’ve seen in 2018,” he added.
As for Northern Nevada’s tourism industry, it will continue to be, “very robust,” with growth conservatively estimated to be 1 to 2 percent, said Phil DeLone, president and CEO of the Reno-Sparks Convention & Visitors Authority. Tourism and convention business is strong. Hotel occupancy rates are good and increasing their average daily rate. Generally, the resorts are doing well, particularly after many of them have improved or are improving their properties.
Regarding the RSCVA’s properties, The Bowling Stadium will undergo a $4 million interior renovation for a modern look in January. The Livestock Events Center will get two new roofs, one on the indoor arena, another on the pavilion. The updating remodel of the Reno-Sparks Convention Center will also continue.
As in the state’s southern area, Reno-Sparks-Tahoe visitor numbers were “kind of flat” in 2018, Bonnenfant indicated. He added, “I think in 2019 you’re going to see another pop in those.” For one, convention business is, and should remain, strong, DeLone said, and the return of the Safari Club International in January is expected to spike visitor totals. The RSCVA is on pace to meet its quota of booking 280,000 meeting and convention room nights for the fiscal year ending June 30, 2019.
According to Delone, factors that will impact tourism positively in the region this year are continued strength of the national economy, additional growth in the area’s air service and ongoing improvements to the destination’s product. One or more additional attractions, announcements for which are expected this year, will help too.
“We’re bullish on Northern Nevada,” he said. “We really see great things ahead of us for the destination.”
Business in Southern Nevada is expected to have another “great” year, said Mary Beth Sewald, president and CEO of the Las Vegas Chamber of Commerce, noting the group’s membership count has been rising.
“By and large people feel like the economic pathway we’re on is bright. We’ve got so many good things that are happening in the next couple of years that should continue to drive a positive economy,” Sewald said.
This year, companies will continue to seek information about and investigate ways they and the community can capitalize commercially on some of the coming attractions—the Raiders’ stadium, MSG Sphere, Resorts World, Las Vegas Ballpark, and others. Factors that will catalyze enterprise in the region overall will continue to be visitor, job and population growth along with financial support for assets to grow the healthcare sector, such as for the University of Nevada, Las Vegas School of Medicine, Sewald indicated.
The business community is eager, Sewald said, to learn what Governor-Elect Steve Sisolak’s priorities will be for the state and what his approach to enterprise and economic development will be.
“He has assured me that he will work with the chamber to promote business-friendly initiatives,” said Sewald. “I am confident about our working relationship moving forward.”
There is concern among some businesses about potential legislation during the 2019 session that, if passed, would impose mandates that could harm our economy and, potentially for smaller enterprises, their ability to generate a profit, or even survive. Issues of particular concern are a proposed minimum wage increase, mandatory paid sick leave, additional taxes and more, along with the possible repeal of changes to the existing construction defect law.
“The upcoming legislative session is very critical in terms of the economic landscape going forward,” Sewald said.
Similarly, continued business growth is projected for Northern Nevada, and sentiments among owners reflect those of their southern counterparts, said Ann Silver, CEO, Reno + Sparks Chamber of Commerce, which is celebrating its 100th anniversary this year.
“We have no reason to think [business and enterprise] will decrease,” she said.
In fact, the chamber’s membership continues to expand by about 30 additional businesses or non-profit organizations a month. The current total is about 1,600 members, roughly 200 of them 501(c)3s.
Silver added that there will be four factors helping to drive business this year: the “relatively friendly” and improving business-related processes required by the cities of Reno and Sparks and Washoe County; Reno-Sparks’ status now of being “on the map,” “hot” and “thriving”; the ongoing redevelopment taking place in Midtown Reno and in Downtown Sparks and the integration of the University of Nevada, Reno with the community.
When it comes to technology, “Reno is probably booming more quickly than we are in Las Vegas,” Miller said. In fact, Northern Nevada boasts two rare characteristics of its technology sector. Growth is happening in small-, medium- and large-sized companies, and it’s taking place in numerous small sectors—labware, medical software and wireless presentation devices, for example, according to Dave Archer, president/CEO, Nevada Center for Entrepreunership and Technology (NCET). This non-profit organization helps Nevadans start and grow their businesses through programs and by connecting them to the right resources.
“It’s the most eclectic group of companies that are starting or relocating here,” he said. “I think we’re going to continue to see continued growth in small, medium and large tech companies and in a wide variety of things.”
This is, in large part, due to the Economic Development Authority of Western Nevada’s (EDAWN) efforts to encourage and recruit startups and other high-tech companies to move here and to ensure those already located here they have what they need to expand.
“High tech is definitely one of the positives looking forward with lesser emphasis on the transportation/warehousing that we’ve been succeeding in for the last few years,” Bonnenfant said.
Nevada’s entire real estate industry, residential and commercial, will continue to face increasing costs of land, materials and labor. In the north, those challenges, along with a slowing in durable goods orders nationally, likely will cool industrial real estate activity in Reno-Sparks, thereby pushing it further east, said Bonnenfant. High-tech companies and headquarters moving to the area should be a boon for the office segment.
In Southern Nevada, there is, “some room to grow in commercial real estate,” Miller said. Of course, the worker shortage could negatively impact the current boom in that area. North Las Vegas has surpassed expectations for absorption of industrial product, and that also looks positive this year, said Aguero. Vacancy rates in retail and office are expected to continue trending downward and lease rates to edge upward.
A potential headwind for residential real estate in the state, in general, is if the Nevada Legislature were to change the existing construction defect law, Bonnenfant said.
“Even the political discussion of tampering with that defect law will cause builders to pause,” he added.
“As far as healthcare, we likely can expect more changes at the state and/or federal levels,” Bonnenfant said. But what those are remains to be seen.
“We believe that the healthcare priorities of 2019 will be driven by the policymakers in Carson City,” said Brett Salmon, president/CEO, Nevada Health Care Association (NVHCA), a non-profit organization that represents skilled nursing facilities and other members.
On the agenda this year for the NVHCA in particular is working to get the reimbursement rates for services provided to Medicaid recipients increased to an adequate level, Salmon said, because the association’s members support this population. As the number of retirees in Nevada rises—and it will, according to Aguero, as retirement is one of the two main reasons people move to Southern Nevada, so will the number of low-income elderly citizens needing and receiving care under the state’s Medicaid program.
Challenges for skilled nursing facility providers this year, which mirror that of those in most medical sectors, will remain grappling with delivering quality care as costs go up, attracting quality workers and improving employee training. The problem of an inadequate number of physicians, nurses and other medical professionals in Nevada will not be solved any time soon.
Another healthcare issue, affordability of insurance premiums, which continue to rise, will still be a concern, particularly for owners of sole proprietorships and small businesses for whom they can be cost prohibitive.
“I do think we will see the nation, states, counties and cities struggle with what is the premium that people are willing to pay to have health insurance,” Silver said.
Nevada’s three largest chambers launched association health plans for their members last year to help address the problem. As a result, they’re attracting additional enterprises.
The Reno + Sparks Chamber’s program offers businesses with between two and 50 full-time employees six options for medical, dental, vision and life insurance through Prominence Health Plan.
The Henderson Chamber of Commerce’s health plan is being offered through United Heatlhcare and includes options for companies based on the number of employees.
The Las Vegas Chamber’s offering consists of medical, dental, vision and life insurance through Anthem Blue Cross/Blue Shield.