Northwest Nevada:

Region’s Economic Diversification Will Continue Aiding its Recovery

The Northwest Nevada economy’s business and labor force diversification will continue carrying the region through the current economic recovery relatively well compared to other areas across the state as the post-pandemic fallout continues making its mark everywhere.

That’s according to the most recent forecasts and trends presented by experts from Beacon Economics, EKAY Economic Consultants Inc., RCG Economics, and the Nevada Department of Employment, Training and Rehabilitation. These experts’ opinions spotlight intriguing viewpoints, trends and projections so your credit union can plan appropriately.

Tahoe Economic Summit’s ‘Tahoe Rising’ Conference
Presented on Sept. 30 (Beacon Economics consulting firm: “To V or not to V: The COVID Recession — Where Next?”):

The Reno-Sparks region’s local non-farm payroll labor force (pool of individuals “willing and able” to work) hit a record high just before the COVID-19 pandemic arrived earlier this year. It plunged from March to May to a level not seen since 2010, but it has since recovered more than halfway (now at a level unseen since 2017). Also, the local unemployment rate spiked from approximately 3.5 percent to 19 percent over a couple short months, but it has come down to about 7.2 percent as of August and is expected to continue slowly dropping (albeit at a slower pace over the next quarter).

Total non-farm jobs (payroll and non-payroll) in the Reno-Sparks region dropped from a high of 250,000 positions pre-COVID to 215,000, but had come back to 232,000 by early autumn. Local job sectors recovering the most include finance, manufacturing, government, and education/health (those in the middle are logistics and construction). And the local job-recovery sectors lagging the most are hospitality, professional/business services, "other" services, information, and mining.

This Northwest Nevada region — unlike southern portions of the state — is a unique economic pocket. It is not dominated by tourism, entertainment or leisure/hospitality job sectors, and its economic recovery is already outpacing other metropolitan areas of the state. Keeping that recovery on track is top of mind for local civic and business leaders as they work through the fourth quarter of 2020 and look for even better performance in 2021. The region’s economy is highly connected to the Tahoe National Forest/eastern Sacramento area of California’s economy and can be seasonally affected by it.

So far, the Reno-Sparks region’s total annualized calendar-year building permits (residential and commercial combined) filed in 2020 are not far behind where they stood during the same period in 2019. Construction has been — and is forecasted to continue being — a major economic/jobs sector for the region for several years. By late August, total building permits were 2,800 (compared to 3,100 at this time in 2019), with a record 12-month calendar year high in 2019 of 5,200 (time will tell by this coming December if 2020 reaches last year’s record high level). Additionally, the City of Sacramento’s total building permits (since the economy is somewhat connected to Northwest Nevada) is higher so far this year versus last year (3,000 by late August versus 2,600 during the same period last year).

Monthly business formation applications in the Northwest Nevada region are rising in tandem with the entire nation, although it’s hard to tell how many are hailing from the local region. In the nearby State of California (where the Sacramento area has economic connections to Northwest Nevada), a combination of monthly high-propensity business applications, corporation applications, and applications with planned wages (three separate categories) individually hit levels between 5,000 – 17,000 from early 2006 to early 2019, depending on the category. However, as of late August 2020 each category was spiking higher to levels unseen for several years, ranging between 7,000 – 22,000 (coming after a short-term decline from April to June of 2020) — which is altogether approximately 35 percent above the previous long-term period. The economy and entrepreneurship are readjusting.

Like most of the nation, total/aggregate consumer spending in the Reno-Sparks region has taken a much smaller hit than certain individual categories. In the United States, total consumer spending as of Sept. 10 is only about 7 percent less than pre-pandemic healthier economic levels, but the individual category of transportation (including air travel) is down 47 percent, and restaurants/hotels combined are down 27 percent. In fact, the Reno hotel occupancy rate (about 56 percent occupied) is down 19 percent comparing July 2019 to July 2020. The historical record high showed local hotel rooms were nearly 70 percent occupied in 2018 but had been steadily downshifting over the past couple of years even before the COVID-19 recession materialized.

To view the slide presentation from the event: click here.

Ekay Economic Consultants Inc. (consulting firm)
Released Oct. 1 (Reno MSA Economic Outlook and Industry Trends for August/September 2020):

The Reno-Sparks metropolitan region's leading economic index — an ongoing projection of future positive or negative economic activity based on current business/consumer activity — just reached its pre-COVID level (February) by mid-August. By this exclusive measurement — which is based off of gaming revenue, taxable sales, home sales, airport passengers, airport cargo, local unemployment claims, monetary supply, and the national stock market — the next 6 to 12 months look positive in general based on month-to-month data (although year-over-year data is still noticeably negative compared to this time last year). Local non-farm employment is up 0.69 percent from July 2020 to August 2020 (but down 6.2 percent from August 2019 to August 2020). Additionally, local household employment is up 1.3 percent from July 2020 to August 2020 (but down 10.6 percent from August 2019 to August 2020).

However, the corresponding coincident economic index (what actually takes place in the economy when looking back) has only recovered halfway from its pre-COVID level. The coincident index increase is the result of the partial reopening of the economy following COVID-19 quarantine measures in March and April 2020. While recovering, this index has still declined by 8.7 percent from August 2019 to August 2020 as some businesses remained closed or open with restrictions, and some employees are choosing to postpone their return to work (meaning the index is at a level not experienced since late 2017). The leading index (mentioned up above) gives hope that the months to come will show an even greater recovery than what’s already transpired. Additionally, the recovery is uneven across the state — the Reno-Sparks region’s job market health is significantly outpacing the Las Vegas region (in addition to never reaching the same unemployment spike that Las Vegas experienced earlier this year).

The Reno-Sparks region’s economic recovery will continue to be impacted by the pandemic and its medical resolution. Further shutdowns can quickly turn the local "V-shaped" recovery in many areas into a W-shape or a very extended V-shape. Time will tell as more data becomes available in the months ahead. Most local industries have reopened, though some with restrictions. This has resulted in a “V-shaped” recovery within very specific local economic/business categories. As businesses reopen, employment and spending are increasing, and unemployment is declining. Much of the recovery has been driven by the region’s industry diversification, since over many years employment has shifted from a leisure/hospitality base to a manufacturing and logistics focus. The region continues to attract new companies and expand existing businesses, helping shield it from recessionary impacts plaguing other parts of Nevada and the United States.

For more local information and data: see the latest Reno MSA Economic Outlook (August/September 2020).

RCG Economics (consulting firm)
Released in late September (Job Flash Report):

The Reno-Sparks regional unemployment rate (people out of work within the group of those willing and able to work) declined 1 point to 7.2 percent in August. This rate is approximately only half of the Las Vegas rate. Compared to August 2019, the Reno-Sparks region lost 14,900 private payroll jobs (103 percent of the total) and the unemployment rate is 4.1 points higher than last year.

Year-over-year average weekly inflation-adjusted wages in the Reno-Sparks region are 4.8 percent higher in August 2020 compared to August 2019. Unlike the Las Vegas region, with its heavy dependence on the tourism industry, the Reno-Sparks region is weathering the pandemic better so far. Its more diverse economy helps, but that does not immunize Reno-Sparks from also seeing an extended downturn like many other areas today.

Click here for more Reno-Sparks regional data on recent unemployment, total jobs, private-sector jobs, average weekly hours, real average weekly wage, rank by metropolitan area, and other year-over-year changes (also includes Southern Nevada and Nevada state).

NV Department of Employment, Training and Rehabilitation (DETR)
Released Oct. 2 (Unemployment Insurance Claims Press Release):

Nevada’s initial claims for unemployment insurance recently fell to the lowest total of claims filed since mid-March 2020. These claims totaled 7,525 for the week ending Sept. 26, down 8.2 percent compared to the week before. Through the week ending Sept. 26, there have been nearly 705,000 initial claims filed in 2020 so far — nearly 681,000 of which have been filed since March.

Nevada’s continuing claims for unemployment insurance recently fell to the lowest total of claims filed since mid-March 2020. Continuing claims — the current number of insured unemployed workers filing weekly for unemployment insurance benefits — fell for the seventh consecutive week to 190,600 (a decline of 6.3 percent from the previous week). This is the fewest continued claims since the report week ending April 11 when there were 189,007 claims filed.

Click here for the entire news release with more data and information. Additionally, view the Nevada Economy in Brief (released Oct. 5).

Nevada: Demographics, Labor, Education & Economic Resources

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