The “second” estimate of U.S. real gross domestic product (GDP) for the fourth quarter of 2021 grew by 7.0 percent at an annual rate, which was revised up by 0.1 percent from the previous estimate. The revision primarily involved upward revisions in both non-residential and residential fixed investment and state and local government spending, which were partly offset by reduced consumer spending and exports than initially expected. The better-than-expected growth in the fourth quarter mainly reflected a surge in inventory investment as businesses restocked depleted inventories caused by high demand and supply disruptions. U.S. nonfarm employment continued its pattern of stronger-than-expected gains, adding 678,000 jobs in February. The U.S. unemployment rate in February also dropped to a pandemic low of 3.8 percent. The average hourly earnings, however, did not budge despite labor shortages and escalating inflation, which suggests that labor shortages perhaps started to ease with persons returning to the labor force. Retail sales in January rebounded strongly, up by 3.7 percent month-over-month. The most recent data indicate that the U.S. economy will continue its expansion. February consumer sentiment, however, continued to decline and remained at its lowest level in a decade, largely due to decreasing household real income caused by higher inflation. In addition, the current Russian invasion of Ukraine is elevating energy and food prices, adding more pressure on the Fed to control inflation. The Federal Reserve will likely increase the federal funds rate by 25 basis points to a target range of 0.25-0.50 percent in March, followed by likely two or more rate increases this year. The war has increased the uncertainty about the future path of the macro-economy in all countries. Its effect on Nevada and its counties has not yet been seen in the data used in these reports. Stay tuned for those effects in future reports.
Nevada’s economic activity posted generally positive signals based on the most recent data. Seasonally adjusted statewide employment added 3,700 jobs in December. The largest gains occurred in the leisure and hospitality and trade, transportation, and utilities sectors, adding 2,400 and 1,600 jobs, respectively. Trade, transportation, and utilities continue to be above pre-pandemic employment levels. The December unemployment rate also fell by 0.5 percent to 6.4 percent. January gaming revenue dropped by 6.2 percent month-over-month amid the spread of the Omicron variant. It, nevertheless, continued to top a seasonally unadjusted $1 billion for a record 11 consecutive months. December taxable sales, nonetheless, surged by 17.7 percent from last month.
The views expressed are those of the authors and do not necessarily represent those of the University of Nevada, Las Vegas or the Nevada System of Higher Education.