The US economy has shown continued, but cautious, signs of economic recovery. The December 29, 2009, release of the New York-based Conference Board’s US Consumer Confidence Index showed consumer confidence rising for the second month straight in November. The Expectations Index climbed to 75.6 from 70.3, reflecting more optimism about the future on the part of the American consumer. Still, consumers agree that the current economic situation is strained. The Conference Board’s Present Situation index, a gauge of consumers’ assessment of the current situation, dropped to 18.8 from 21.2. This is a 26-year low for the index. There is some evidence of improvement in the national housing market. Prices appear to have leveled off and existing home sales spiked in November as first-time buyers raced to close pending sales prior to the November 30 cut-off for the recently extended tax credit. Finally, the S&P 500, a broad measure of price appreciation in stocks, continued to climb, rising over 22% from the beginning of the year.
As we wrap up 2009, the Nevada economy continues to struggle. Employment has fallen by 6.1% from November 2008. Unemployment declined modestly from 12.6% in October to 11.8% in November. Unfortunately, this is not an indication of economic recovery. Rather, the drop is primarily a result of declining labor force as discouraged workers leave the labor force and people’s unemployment benefits run out. The decline in taxable sales and gaming revenue in the state is, perhaps, even more troubling. In the past year, taxable sales have fallen by over 17% and gaming revenue is down by almost 12%. These categories make up over 70% of Nevada’s state revenue, and as a result, suggest that the fiscal situation will continue to deteriorate in the coming year. Visitor volume increased slightly this year, but the steep declines in gaming revenue and taxable sales suggest that visitors are being much more conservative in their spending habits.
Much of Nevada’s woes are evident in Clark County. Employment in Clark County was down 6.7% and the unemployment rate stood at a stark 12% in November. Taxable sales and gaming revenue are off by 19.0% and 11.1%, respectively. Residential-permitting activity is flat and commercial permitting has fallen by an astounding 71.4%. Despite the opening of the luxury properties at CityCenter in December, New Year’s Eve room rates climbed a modest $10 per room from last year. This is evidence of continued weakness in demand for tourism and gaming in Southern Nevada.
Washoe County has not fared much better. The unemployment rate stands at 11.3%. Residential permitting is down 25% over the past year and commercial permitting has fallen a dramatic 58%.
Our general outlook for Nevada in the coming months is fairly bleak. We expect Nevada to continue to shed more jobs, as firms expend their cash reserves. Although we do expect a modest increase in visitor volume, we expect that consumers will remain quite conservative. This means that gaming revenue and taxable sales are unlikely to improve in the short term.
Mary Riddel, Ph.D.
Interim Director, CBER
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