Business Indicators - May 2005

Business Indicators

by R. Keith Schwer

U.S. job growth is up 1.8 percent over a year ago, with the U.S. unemployment rate hovering in the mid-5 percent range. This is an improvement from last year’s conditions, particularly for job growth. Still, job conditions in Nevada remain better than nationally, and have done so for some time. Job growth in Nevada increased briskly during the last year, up 6.8, 7.6 and 5.2 percent for Nevada, Las Vegas and Reno, respectively. Also, rural Nevada has seen a resurgence because of increased commodity prices; these prices stand at the highest levels in some time, with every sign that demand will remain strong. As a result, the strength of job growth in the Silver State has pushed unemployment rates down into the 4 percent range.

Some Nevada indicators already point to maturity in the current expansion. For example, gaming revenue for January recorded a 3.9 percent growth rate over the same month a year ago. Adjusting these numbers for inflation, the CPI, for example, is up 2.3 percent, which leaves a 1.6 percent inflation-adjusted growth rate. In comparison, overall spending in the U.S., as measured by inflation-adjusted GDP, is up 3.9 percent. Not surprisingly, national consumer spending continues to post good numbers. Housing starts keep growing, having passed the expectations of many that such a robust expansion is likely to fall off the brisk pace of the past few years.

The year ahead will likely see the Federal Reserve pursue a policy of continued short-term interest rate increases, tending to slow the rate of national growth. In the meantime, Nevada will also likely see slower rates of growth in 2005, if for no other reason than 2004 was a banner year from an economic perspective. All in all, 2005 will bring maturation to this period of expansion.