Business Indicators - October 2001

Business Indicators

by R. Keith Schwer

Stock-market analysts continue to speak in terms of a recession. Stock-prices indexes are down substantially from the peak of 2000. The overall U.S. economy, however, continues to grow, though at a modest rate. The official definition of a recession requires two quarters of decline of the overall economy. As of the second quarter 2001, the U.S. Gross Domestic Product, adjusted for inflation, continues to grow. Moreover, many regions of the U.S. have yet to experience economic hardship. To be sure, the fast-growing high-tech centers that benefited from the boom of the 1990s now find their areas experiencing the malaise usually associated with recessions. Nevada, to date, has seen continued expansion and has avoided the much-discussed recession now affecting the Silicon Valley.

Employment in Nevada now stands 3.8 percent above the year-ago level, with Clark County (Las Vegas) and Washoe County (Reno) up 4.1 percent and 3.1 percent, respectively. Unemployment rates are also up. The state’s unemployment rate now stands at 5.0 percent, compared with 4.1 percent a year ago. Without a strong economic resurgence in U.S. manufacturing, further deterioration in the employment picture during the last half of 2001 is expected.

To date, consumer spending remains strong. Spending for housing and autos, in particular, has helped counter the sharp drop in investment spending associated with information technology. Moreover, survey findings indicating anticipated future investment in computers and communication hardware foretell a slow recovery of investment spending. Federal tax rebates and aggressive lowering of interest rates under the control of the Federal Reserve, however, should begin buoying the U.S. economy in late 2001 and early 2002.

The chances of an overall recession remain significant, but still less than the chances of sustained growth. All in all, future overall economic conditions remain decidedly guarded as the longest economic expansion on record continues.