Business Indicators - March 2007

Business Indicators

by R. Keith Schwer

Job growth is one of a few key indicators for assessing current economic health. The most recent information for the U.S. economy shows more than 150,000 new jobs created and the unemployment rate at 4.5 percent. This job strength comes while two large sectors, housing and autos, have weakened. The slack in housing and automobiles has lowered expectations for growth in 2007. Still the outlook remains on the positive side.

The job indicator for Nevada plays a similar role of importance as does the national job data. Indeed, it may even carry greater weight for evaluation because of the fewer measures available for assessing state and local economies. In the Silver State, the job growth rate continues to be greater than the national job growth rate. The most recent data show Nevada growing by more than three times the national rate. Job growth for Las Vegas stands a little higher than job growth in Reno, but Nevada’s two major urban areas continue to be among the nation’s fastest-growing urban areas.

Job growth in Nevada has continued unabated while housing prices jumped significantly over the past three years. Since wages and incomes have not kept pace with the cost of housing, new residents find living in Nevada less attractive than earlier arrivals. Housing has become less affordable. Moreover, housing affordability will erode the advantages that the Silver State has enjoyed for sometime in attracting new businesses and residents. This disadvantage does not occur for new residents coming from other areas of the U. S. that have even higher housing prices than in Nevada, for example, the major urban centers of California. Last year Nevada fell from being the nation’s fastest-growing state and Las Vegas the fastest-growing regional economy. All in all, slower population growth in the years ahead might be expected.

As the trend will be toward slower rates of growth, the cyclical adjustment in housing continues. Though how long the housing market will remain in retreat remains unknown, one can fairly well assume that the adjustment which so far has been sharp will continue throughout much of 2007. How long these adjustments would take depends on developing factors. Still, this housing-market adjustment comes at a fortuitous time; other sectors of the economy are doing well. So, a strong Nevada economy should weather the bumpy ride of the adjusting housing market fairly well, though clearly housing-market players face difficulties.