As Governor Steve Sisolak looks at the state’s strong economic performance at the dawn of a new decade, he sees it well-positioned to make investments that will create jobs and wealth for years to come.
Top economists expect Nevada’s strong performance will continue into the New Year and that optimism, Sisolak says, creates an opportunity to address long-term economic issues.
“I want an economy that reaches every kitchen table in every working household in this state,” he says.
With a statewide unemployment rate of 4.1 percent demonstrating a strong economy, Sisolak says Nevada can focus attention on better education and job training, better access to quality healthcare, and enhancement of Nevada’s already predictable and competitive business environment.
“Since the recession, the focus has been on job creation, which has helped tremendously to get people back to work to provide for themselves and their families. However, the quality of those jobs, and the wages they pay, need to be higher and more stable,” Sisolak says.
Barring a global economic shock — a war or sharply rising energy prices, for instance — the Nevada economy appears on track for continued growth during 2020, says Brian Bonnenfant, project manager at the Center for Regional Studies at the University of Nevada, Reno.
Business leaders agree. Only 25 percent of executives surveyed recently by the UNLV Center for Business and Economic Research expect a national recession in 2020. The remaining 75 percent don’t expect a downturn until 2021 — maybe even 2022.
On the other hand, Bonnenfant notes presidential election years notoriously are accompanied by increased uncertainty for business owners and managers.
Stephen Miller, director of the UNLV Center for Business and Economic Research, adds that trade negotiations with China will play a key role in the U.S. economy next year, and effects will extend to Nevada.
The talks are important both for their actual results — the tariffs and trade rules that effect business costs and competition — as well as the disruption that takes place before deals are reached, Miller says. Jeremy Aguero, a principal in Las Vegas-based Applied Analysis, also sees a few clouds on the economic horizon — political uncertainty, some cooling in the pace of job creation in Nevada and slowing acceleration of housing prices in Las Vegas.
But there’s no certainty that any of the aches and pains will turn into a full-blown case of the economic flu. Instead, Aguero expects Southern Nevada’s current economic momentum, for better and for ill, to continue into 2020.
But he cautions, “Las Vegas is not recession-proof.” A national recession almost certainly would bring a downturn to Nevada.
Aguero is skeptical, however, of pundits who believe a downturn is inevitable simply because the current economic expansion, which began a decade ago, is the longest in the nation’s history.
“We don’t go into recessions just because we have run out of time,” says Aguero.
Aguero says four keys to the performance of the Southern Nevada economy during 2020 include:
- Ability of the construction and development sectors to pick up the slack that inevitably will result from the completion of the $1.9 billion Raiders Allegiant Stadium and the $1.5 billion expansion and renovation of the Las Vegas Convention Center.
- Success of the convention center and the stadium in attracting new events.
- Pace of population migration to Nevada, both among people looking for new jobs as well as retirees.
- Willingness of the state’s leaders to continue focused efforts to recruit new companies and encourage expansion of existing companies. Job-creation was a priority when unemployment stood at 14 percent, Aguero says, but some may consider it less important when the jobless rate has fallen to 4 percent.
Sisolak agrees that economic development is a priority, but he says more than job creation is at stake as the state develops a new strategic plan for its economic development efforts.
“We will continue seeking out businesses that fit our economic goals and have a strong commitment to corporate social responsibility,” the governor says.
There are several key elements to Nevada’s economy that experts are tracking for 2020.
Even though the national economy in 2019 was driven by consumer spending, Nevada’s travel and hospitality sectors didn’t see the same growth.
“Tourism is a bit soft, and visitor volumes have been flat,” says UNLV’s Miller.
One possibility, he says, is that visitor numbers have been depressed by the lack of hotel room inventory. The completion of 13,000 new hotel rooms in Southern Nevada over the next couple of years — more than 5,000 of them in 2020 alone — will answer whether inventory has been the issue.
More immediately, two major tourism infrastructure projects, Raiders Allegiant Stadium and the Convention Center expansion, promise to drive visitor numbers in Las Vegas.
Aguero notes that the stadium will draw visitors to events throughout the year, such as the Pac-12 Conference football championship game that’s contracted for the new stadium in 2020 and 2021.
Over the longer term, demographic trends will boost the state’s tourism sector during 2020 and years to come, says Bonnenfant.
“The Baby Boomers have money, and now they are retiring and traveling,” he says. “That’s going to be a big contributor to tourism, particularly in Southern Nevada.”
The tourism sector in Northern Nevada, meanwhile, will continue to benefit from the growth in Millennial travelers who seek out the region’s active outdoor sports — skiing, mountain-climbing, hiking and mountain biking.
Employment and Jobs
UNLV’s Center for Business and Economic Research forecasts statewide job growth of 1.6 percent this year — 1.7 percent in Southern Nevada. That marks some cooling from growth rates a little over 2 percent in 2019, and mostly results from expectations that the national growth rate will back off a bit.
The state’s unemployment rate was running just a hair above 4 percent in late 2019, while the U.S. rate was running about 3.5 percent.
Miller explains Nevada began to recover later than other states after the Great Recession and took a slower path to today’s strong performance. “We’ve been playing a catch-up game for a long time,” he says.
Where will the new jobs be? Michael Brown, executive director of the Governor’s Office of Economic Development (GOED), says more than 40 percent of the companies that the agency assists with relocation or expansion are manufacturers. Logistics companies and business-services firms each account for about 20 percent.
In the first nine months of 2019, GOED assisted 141 companies that are creating more than 14,500 jobs paying an average of $24.61 an hour. Many of those jobs will be filled during 2020.
After two years in which the appreciation in home prices created one the nation’s hottest markets in Las Vegas, price increases cooled substantially in the second half of 2019.
Aguero says the reason wasn’t hard to find: Sharply higher home prices outstripped the growth in family incomes.
Developers responded with more entry level residential construction, but Aguero says many new homes still carry price tags that aren’t affordable for working families.
On the other hand, the housing market in Southern Nevada continues to be buoyed by newcomers moving from out of state. Often, Aguero says, they’ve cashed out big equity positions that they’re ready to invest in a new house.
In Northern Nevada, multi-family developments are meeting much of the need for new housing, Bonnenfant says, because developers struggle to build affordably priced single-family homes in the face of high costs for land, labor and materials.
But, he says demographics play a role, too.
Many younger workers moving to the Reno area are cautious about making a commitment to home ownership, preferring to wait to make sure they want to establish roots in northern Nevada.
In commercial real estate, rising population and growth in retail sales may spur development of more shopping center space in Southern Nevada, says Robin Civish, president of Commercial Alliance of Las Vegas, a professional group for the commercial real estate sector.
“Because of the lack of retail development since the end of the recession, vacancy has continued to decline to as low as 6.5 percent overall in Las Vegas,” Civish says. “Prime retail spaces are hard to find. The majority of the vacancy is in vacant big-box spaces and poorly positioned strip centers.” As vacancies have declined, rents in some areas are moving up.
New space is coming on line with St. Rose Square (better known as the Costco Center) in Henderson, the 30-acre Skye Canyon Village anchored by Smith’s in northwest Las Vegas and several smaller strip centers.
Bonnenfant notes, meanwhile, that industrial construction in northern Nevada may be nearing what he calls a “recalibration” after large-scale development of manufacturing and distribution facilities in recent years.
Industrial needs will change as trade related issues, from intellectual-property protection to increasing tariffs, alter the way goods flow around the world — including the goods that are made in Nevada and distributed from the state’s warehouses.
Nevada’s rapid population growth — it’s tied with Idaho as the fastest-growing in the nation — presents big opportunities and big challenges to the state’s healthcare sector.
On one hand, a growing population means a growing number of people need medical services.
On the other hand, healthcare organizations across the state are scrambling to find the professionals and build the facilities they need to meet demand, says Ty Windfeldt, chief operations officer, health services at Reno-based Renown Health.
The challenges are all the greater, he says, because aging Baby Boomers need more medical care, and Nevada continues to attract large numbers of retirees. Retirement years typically account for about 80 percent of the lifetime amounts that most people spend on healthcare, Windfeldt says.
Growth demands new facilities. Sunrise Hospital and Medical Center, for instance, is adding a five-story tower in a $130 million expansion at its Las Vegas campus. A $95 million project at Centennial Hills Hospital will add 56 beds to the health-care center in northwest Las Vegas.
Numerous smaller clinics and medical practices also are investing in new and upgraded facilities across the Las Vegas Valley.
In northern Nevada, construction started last autumn on the 200-bed Northern Nevada Sierra Medical Center in south Reno. Its owner, Universal Health Services Inc., also invested nearly $12 million in expansion of its Northern Nevada Medical Center in Sparks.
Equally important, Windfeldt says, are focused efforts to use technology and team based approaches to control medical costs.
“How are we going to bend that cost curve?” he asks. “We can’t continue to see double-digit increases in medical costs year after year.”
Renown, for instance, is pushing hard to improve residents’ access to primary-care teams — doctors, nurses, physicians’ assistants — who provide care that’s more costeffective than urgent-care or emergency room visits.
But all this takes highly skilled people, and Windfeldt says Renown is working closely with educational institutions across the state to increase the number of doctors, nurses and other professionals available to fill a growing number of positions.
Government, too, plays a role, Sisolak says.
“My administration will be looking at occupational licensing to make sure the rules foster a competitive environment that encourages health professionals and others to grow their businesses locally,” the governor says.
For all the challenges faced by the healthcare sector, the growing and aging population sets the stage for rapid growth.
“Healthcare presents the single greatest opportunity for southern Nevada,” says Aguero.
Technology and Startups
From the massive data centers operated by Las Vegas-based Switch and the new $600 million data center under construction for Google in Las Vegas to the customer technology center where Aptiv is testing its largest fleet of self-driving vehicles, technology is playing a larger role in the economy of Nevada.
Still, Miller says, “Reno has had more success moving forward on that.”
Implosion of Faraday Future’s plans to build electric vehicles in North Las Vegas was a setback for the sector’s growth in southern Nevada.
“We’re still looking for a major player that will jump-start the sector in southern Nevada,” says Miller.
In northern Nevada, growth of the technology sector during 2020 is likely to be driven by new data centers such as a mammoth facility under development for Google at the Reno Tahoe Industrial Center, says Bonnenfant.
Developers of data centers like Nevada’s energy prices and the possibilities of tapping into renewable energy sources, he says. Then too, Nevada’s cool nights reduce airconditioning requirements for giant buildings filled with servers.
The downside to data centers: Despite the large size of their physical facilities, they typically don’t employ a lot of people.
Aguero expects tech growth to continue to grow as the result of the state’s historic tax advantages as well as newer legislation that encourages industries such as block-chain users and developers of autonomous vehicles.
Still, the economist says the southern Nevada educational system isn’t yet producing enough graduates with the skills to fill all of the technology jobs that are being created.
Sisolak shares that concern. “We need to better match our workforce with our economy,” the governor says. “We must continue to invest in education, especially STEM programs, to ensure our students remain competitive in a quickly changing job market as well as promote alternative career paths, including high-skilled trades and apprenticeship programs.”
Entrepreneurial startups, many of them tech-related, are flowering across the state.
The Governor’s Office of Economic Development has undertaken five steps to boost entrepreneurial companies:
- Increasing research capacity
- Commercializing research into new products and startups
- Fostering entrepreneurship
- Increasing access to capital
- Expanding the technically skilled workforce
“Diversifying our economy and incubating startups and entrepreneurial ventures are exceedingly important to job creation within the Nevada economy,” says Brown.
While tiny new companies currently don’t account for much employment in Southern Nevada — especially when compared with giant companies in the hospitality and gaming businesses — Aguero says they provide future promise for the region’s economy. The problem? Trying to guess which entrepreneurial startup will be the next big thing.