Business Indicators - September 2005

Business Indicators

by R. Keith Schwer

The data, across a wide range of measures, support what we hear: the economy is doing well, with more favorable than unfavorable financial reports.

The U.S. price and employment picture shows stable prices, even in the face of sharp increases in oil prices, and a steadily – if belatedly – improving job market. Inflation remains at less than a 3 percent growth rate, up 2.5 percent annually for the Consumer Price Index. Even with the employment-to-population ratio remaining well below the peak levels of the 1990s’ expansion, the U.S. unemployment rate continues to drift downward, now hovering at 5 percent.

Nevada’s key economic sectors also report strong performance of late, though Reno’s travel and tourism sector languishes, having grown a modest 0.7 percent from April 2004 to April 2005. This is in fact a decline, if adjusted for inflation. In comparison, Las Vegas travel and tourism has been lively, up 6.5 percent measured year-over-year for April. Construction continues to remain robust throughout the state, with both Reno and Las Vegas continuing to do very well. The marked increase in commodity prices has rekindled growth and further stimulated the economies of rural Nevada.

Though most foresee no quick reversal in economic fundamentals, it is not uncommon for problems to first emerge during the mid-phase of the business cycle. It is not surprising, therefore, to see the increasing attention now focusing on housing-market speculation. The increasing use of interest-only mortgages, purchases of real estate for quick price appreciation, the increasing participation in the mortgage market by households with limited resources or precarious finances, along with modestly increasing rates, foretell one possible issue that could bring the current expansion to a close, but current conditions point only to a possible concern, not a high-level alert.

All in all, strong momentum has kept the Silver State’s economy performing nicely, and it should do so in the months ahead.