Business Indicators - April 2002

Business Indicators

by R. Keith Schwer

Is it over? Has the decline come to an end? For some, especially the optimists, the recession has already ended. Wall Street analysts remain generally optimistic. On the other hand, surveys report businesses holding a pessimistic view toward performance during 2002.

The official declaration of a business-cycle turning point tends to be made after a preponderance of confirming information is available. For example, the peak of the last economic expansion turned down in March 2001 even though it was late November before the official call was made. As a result, some view this overly conservative official approach an opportunity to be the first to make the call in a media eager for news and willing to forego demands for confirming evidence.

The optimists point to low interest rates, readily available funding, and strong consumer-spending activity. Housing and autos, the big ticket items, continue to do well. These consumer-spending sectors invariably do poorly during most recessions. As a result, these conditions point to a shallow and short downturn. On the other hand, business executives continue to report a weak revenue outlook and a hesitancy to return to investing at previous levels, casting a shadow on what might otherwise be a call of clear sailing ahead. Some key industries suffer from excess capacity. But, beyond the question of when the economy stopped declining, there is far greater unanimity that whether the near term is one of a decline or expansion, 2002 will be a year of modest change – that is, people agree we face a slow recovery.

The latest indicators for Nevada generally show slight changes from the previous monthly values, but weaker conditions from year-ago levels. Unemployment, which often continues to increase after an economy turns back up, is now at 6.2 percent for Nevada and 5.6 percent for the U.S. Most anticipate further increases in the months ahead. Just last year, these rates were at 3.9 percent and 4.2 percent, respectively.

The most recent key indicators for the Silver State are down from year-ago levels. Taxable sales, gaming revenue and visitor volume all dropped. However, given the national economic decline and the reduced travel after September 11, the declines are more modest than what might have otherwise occurred. As a result, the evidence does give reason to believe that the worst may be over. We recognize, of course, that risks to forecasts have increased since 2001.