Business Indicators - January 2004

Business Indicators

by R. Keith Schwer

The third-quarter inflation-adjusted rate of growth in aggregate spending moved forward at a brisk rate of more than 2.0 percent above the second quarter (or, at a seasonally adjusted annualized rate of 8.2 percent), signaling an economy that is gaining steam. Personal consumption, equipment and software purchases, exports and residential-fixed investment were cited as components contributing most significantly to the growth. The presence of equipment, software and investment expenditures on the list of main contributors reflects a shift from dependency on consumption as the engine of growth – an important sign that the recession is behind us.

Employment levels and the unemployment rate remain flat. With excess capacity and rapid productivity gains, improvements in the labor market should follow a more delayed pattern than in the past. Still, the robust growth in Gross Domestic Product (GDP) for the third quarter, an indication of strength and growth continuity for 2004, should result in labor-market improvements in the months ahead.

The most recent indicators for Nevada generally look favorable. Unlike the noticeably flat U.S. labor-market data, Nevada conditions show employment levels above year-ago levels. These rates exceed the growth levels of national employment by more than 3 percent. The labor-market picture suggests that Nevada has weathered the recession of 2001 and is back on a well-defined expansion path. Taxable sales are also up 12 percent from a year ago.

Reno continues to show some weakness in its gaming revenue, down 13.6 percent from August to September and down 7.9 percent from year-ago levels. This weakness is, however, balanced by a favorable unemployment rate of 3.7 percent and employment growth of 3.1 percent, suggesting expansion in the region’s non-gaming sectors. Lastly, the profitability of rural Nevada’s mining sector has brightened considerably with the run-up in gold prices, now in excess of $400. By all appearances, Nevada’s 2004 outlook is good.