Business Indicators - December 2006

Business Indicators

by R. Keith Schwer

The most recent (September 2006) data for residential permits for both Las Vegas and Reno show a pronounced slowdown, dropping 35.6 percent and 45.4 percent, respectively. These sharp declines reflect market corrections to housing activity that have been in the wind for some time. After the dot-com stock-market decline, housing increasingly became an investment of choice for many people. With the realization that the market was overheated, corrections are now underway.

As markets may display exuberance during upswings, excessive pessimism can also occur during a downturn. Moreover, the timing of these phases is often driven by non-economic considerations. Still, investors will find it profitable to buy and sell in the coming months. As a result, market turbulence will give way to prudence – markets will correct the imbalance.

However, as is often the case, other economic factors during a period of sharp change may get too little attention and even be ignored. Housing is but one weakness in one sector of the economy amid otherwise flourishing economic sectors, both nationally and in the Silver State.

The Silver State continues to post solid job growth, up 5.1 percent, 5.5 percent and 4.6 percent, respectively, in Nevada, Las Vegas and Reno on an annual basis. Unemployment rates remain at 4 percent or less in Nevada. Spending continues to grow – up 4.1 percent as measured in Nevada taxable sales.

All in all, Nevada shows signs of slower growth from torrid rates of the past, to be sure, but our future is one of growth and development without a serious recession threat in sight.