Each year, Nevada Business Magazine compiles data comparing Nevada to other states and to U.S. averages. A big part of these annual exercises is tracking how the state responds to the ups and downs of economic cycles. However, assessing the damage done by the economic fallout of the COVID pandemic is rather like taking stock after a Category 5 hurricane. Although the sun is finally peeking through the clouds, the numbers show that it’s not yet time for Nevadans to put away their sandbags and umbrellas.
Compared to other states, Nevada’s economy took heavy damage over the past year because of its dependence on travel and tourism. In addition, it is still challenged with low rankings in education and healthcare, along with a higher-than-average crime rate. These long-standing problems affect Nevadans’ quality of life, as well as impeding efforts to diversify the economy by attracting new businesses.
Travel & Tourism
One measure of the economic devastation caused by the pandemic is statewide visitor volume, which declined more than 36 percent year-over-year. Hotel occupancy dropped 43 percent, and convention attendance disappeared entirely from April through December 2020. Nevada was not alone in suffering losses to a tourist economy, with other major tourist states experiencing double-digit losses. The second half of the year is expected to be improved, as long as the surge in COVID cases is contained and numbers don’t continue moving in the wrong direction.
Demographics show that life in the state’s urban areas is not that different from life in the rest of the country. Nevadans may work in a world-famous hotel or a 5-star restaurant, but away from the glitter of the resorts, they go shopping, attend religious services and enjoy parks, golf courses and cultural events. Considering the vast distances between urban areas, the population density is much lower than in other states, and rural Nevadans enjoy a lifestyle all their own.
Nevada has been near the bottom in national education rankings for decades, well before the magazine began tracking. Some progress has been made, but moving from 50th place to 46th still earns the state a failing grade. Nevada students are less likely to be proficient in basic subjects like English and math, and more likely to drop out of school. However, students in the Silver State do have higher scores in SAT testing and clear improvement has been made in many of these areas. More is being done as stakeholders and business leaders get involved, recognizing the importance education has to economic development.
Nevada is in the middle of the pack when it comes to taxes for individuals, ranking 29th, but has no state income tax, relying instead on sales taxes and other types of assessments. It fares better in business taxes, with an overall ranking of seventh. Many companies choose to come to Nevada from higher-tax states like California (ranked 49th) because it has no corporate income tax, no inventory tax, no franchise tax and no unitary tax.
Cost of Living
Housing and rental prices are significantly higher than the national average, a statistic that isn’t likely to improve any time soon given the current boom in housing prices. Other common household expenses are in line with national numbers. It should be noted that gas prices since this report was pulled have significantly risen. As of press time, the average gas price in Nevada was $4.06 for a gallon of regular unleaded gas. But, a dollar still goes further in Nevada than the national average, according to a study that includes the impact of state taxes.
Cost of Doing Business
Compared to other locations, it’s generally less expensive to operate a mid- to large-sized business in Nevada, according to the Boyd Company, which considers a wide range of factors, including lease rates, payroll costs, business taxes and workers comp rates. Minden, Fernley and Gardnerville offer convenient access to Bay Area markets without California’s high costs. In southern Nevada, Mesquite and Henderson compare favorably with other locations. Commercial real estate rates in the Reno and Las Vegas metro areas are generally lower than in competitive markets.
The Silver State’s healthcare ranking has been an ongoing challenge, especially concerning access to care. Nevada is in 45th place among the states for active physicians per 100,000 population. The pandemic placed an additional burden on understaffed facilities, making the shortage of healthcare professionals even more critical. The lack of residency positions for recently graduated doctors means that many graduates must go out of state to complete their residencies, and they often decide not to return. Local medical schools are rising to the challenge, building more residencies whenever possible. The Kirk Kerkorkian School of Medicine at UNLV’s $150 million medical education building is also scheduled for completion next year.
The recent surge in cases this summer, chiefly due to the delta variant of COVID, has once again raised the number of hospitalizations and deaths attributed to the pandemic. Compared to the U.S. average, Nevada has had more cases and deaths, and also has a higher rate of positive tests. Nevada has a lower percentage of vaccinated adults than the U.S. average, with less than half of adults having completed the vaccination process.
Ranking tenth in the nation for violent crimes may not seem like a good statistic, but 2019 numbers (the latest available from the FBI) are actually much improved from previous years. For example, Nevada was ranked third in 2014 for violent crimes and seventh for murders. The crime rate is calculated per 100,000 population, which skews Nevada’s numbers since millions of people visit the Silver State each year, increasing the number of people actually present at any one time.
Nevada’s real estate market, famous for its boom-and-bust cycles, has been red hot for some time now. Home values across the state have increased rapidly since last year, reaching double digits in some locations, a trend that is seen in other states as well. New residential developments are sprouting up across Nevada to keep up with demand, driven partly by an influx of new residents from other states. With increasing demand, low mortgage interest rates and rising prices for building materials, home price increases are not expected to stall anytime soon.
When COVID restrictions closed resorts across the state, thousands of Nevadans were thrown out of work – some for weeks or months and some permanently. The unemployment rate soared from 3.6 percent in February 2020 to 28.7 percent in April 2020, a month that the national rate hit 14.7 percent. Now that most resorts and businesses have reopened, the unemployment rate is under 8 percent. The state regained 15,400 jobs in June 2021, chiefly in the leisure and hospitality sector, which accounts for more than 20 percent of total employment in Nevada. The future of the job market in Nevada depends on how the state’s major industry is affected by the public health climate, including any potential new waves of infection.
Nevada ranks high in many national surveys because of its relatively business-friendly environment, moderate tax rates, and low cost of doing business. It’s location near West Coast markets, without the high cost of West Coast taxes and real estate, makes it attractive to companies looking to expand or relocate. Economic development agencies are doing what they can to help diversify the state’s economy, but Nevada’s economic future depends on improving its ranking in education, healthcare and crime, as well as overcoming the fallout from ongoing COVID issues.