Southern Nevada:

Select Job Industries to Bridge Economic Recovery During 2021

Southern Nevada’s economic recovery will gain more momentum by late 2021 and finally reach a pace of growth commensurate with what local business leaders and consumers have been expecting. Until then, very select job industries will help bridge the region to fully recuperating from the impact of the COVID-19 recession.

That’s according to the most recent forecast and trends presented by experts at this year’s “Outlook 2021” conference hosted by the Las Vegas Global Economic Alliance. These experts’ opinions spotlight intriguing viewpoints and projections so your credit union can plan appropriately.

Southern Nevada
Presented on Dec. 2 by the Center for Business and Economic Research at the Lee Business School (at University of Nevada — Las Vegas) and Beacon Economics consulting firm:

A full economic recovery in Southern Nevada from the COVID-19 recession probably won’t materialize until 2023 — although by late 2021 the situation will have significantly improved from today. Annualized U.S. gross domestic product (GDP) plunged -33 percent in second-quarter 2020 and bounced back by 34 percent in the third quarter (and the Las Vegas region, like others, is connect to U.S. GDP). It is expected to grow a strong 5.2 percent in fourth-quarter 2020 before averaging 2.5 percent in 2021, 2 percent in 2022, and 1.5 percent in 2023. Since job growth lags GDP growth (economic output), the local region’s unemployment rate will probably not see the record-low figure it registered in January 2020 until sometime in 2023.

Using economic and industry-sector measurements, the Southern Nevada forecast predicts year-over-year growth in the following areas for 2021 and 2022 (versus 2020 in parenthesis): visitor volume at 54 percent and 10 percent (versus -51 percent in 2020); gross gaming revenue at 31 percent and 11 percent (versus -36 percent in 2020); hotel/motel occupancy at 30 percent and 3 percent (versus -41 percent in 2020); Standard and Poor's CoreLogic Case-Shiller Home Price Indices for Las Vegas at 5 percent and 2 percent (versus 4 percent in 2020); combined single-family and multi-family homebuilding permits at 5 percent and 2 percent (versus 10 percent in 2020); payroll employment at 6 percent and 3 percent (versus -11 percent in 2020); total personal income at 1 percent and 1 percent (versus 8 percent in 2020); and population at 2 percent and 2 percent (versus 2 percent in 2020).

Putting aside what local economists predict, 45 percent of Las Vegas-area business owners don’t expect a “full recovery” to materialize from the COVID-19 recession until sometime in mid-2022. However, equal responses were recorded for survey respondents who said “2023 or later” (27 percent of respondents) and “2021” (27 percent). Only 1 percent of respondents said 2020. Regarding the congressional fiscal policy response to the recession (federal financial relief and stimulus to households and businesses by Congress and the Treasury Department), 30 percent of respondents think it’s been “relatively weak,” 24 percent say “too much,” 23 percent say “just about right,” 18 percent say “relatively strong,” and 5 percent say “much too strong.” Regarding the Federal Reserve’s monetary policy response (lowering short-term and long-term interest rates and purchasing financial assets and corporate debt), 35 percent think it’s been “just about right,” 24 percent say “relatively weak,” 22 percent say “relatively strong,” 14 percent say “much too weak,” and 5 percent say “much too strong.”

“Economic uncertainty” and “COVID-19” are the two most important challenges that Las Vegas-area businesses say they face today. This is according to the same survey. While 29 percent of local business owners stated “economic uncertainty,” approximately 26 percent of survey respondents said “COVID-19,” 19 percent say “other issues,” 14 percent say “finding qualified employees,” 10 percent say “decreasing sales,” and 2 percent say “higher operating and/or production costs.”

The Southern Nevada “coincident economic index” (what actually takes place in the economy when looking back compared to leading indicators) has bounced back nicely, although much improvement remains to be seen. This index takes into account several underlying local business/commerce and consumer trends and activities. Trending at approximately “250” before the COVID-19 recession hit the economy, it plunged nearly 30 percent to 175 before recovering to 230 in autumn (now only 8 percent below its pre-pandemic level). It now stands just slightly above its prior peak in the mid-2000s and has a noticeable amount of ground the regain. While the economies of many metropolitan regions across the nation were impacted in very select areas, the Las Vegas regional economy was hit in nearly all industries due to the region’s highly-above-average concentration in leisure, hospitality, eating, drinking, sports entertainment, gaming and more. The negative hit overflowed more immediately and broadly to other non-leisure industries in the Las Vegas area compared to other regions.

Total residential and commercial construction employment in Southern Nevada is a bright spot. This trend should be put into context of the decline in other local industries due to the recession earlier this year caused by the COVID-19 pandemic. Local construction employment has barely been impacted by the economic slowdown in 2020. Going into the pandemic, this sector kept rising and industry employment hit a mini-peak of 78,000 workers before slightly declining to 71,000 by autumn (the highest historical record was 110,000 in 2007 before plunging to 37,000 by 2012 due to the Great Recession of 2007 – 2009). Local leaders and households are holding onto stronger areas such as residential and commercial construction, professional and business services, logistics and warehousing, and other job sectors versus weaker areas in recreation, tourism, retail, restaurants, and gaming as 2020 transitions into 2021 and the economy continues its recovery. Additionally, a local construction index that takes into account a variety of underlying industry/business factors and measurements has plateaued at about “115” but not started dropping (115 is where it stood in 2009 on its way down before troughing at 97, and where it was in 2004 on its way up before peaking-out at 131).

Several Clark County yearly economic/business index measurements tied to tourism, leisure/hospitality and gaming fell off a cliff earlier this year before spiking significantly thereafter (but have not fully recovered). These annualized indices take into account a variety of underlying industry/business factors and measurements as they are recovering from the COVID-19 recession earlier this year. The local tourism index plunged 43 percent before nearly fully rebounding and now remains only 9 percent below its pre-pandemic level. The passenger index that tracks McCarran International Airport dropped 95 percent before only slightly recouping and is now 61 percent below its pre-pandemic level. The hotel occupancy index declined 98 percent before halfway recovering to 49 percent below its pre-pandemic level. And local visitor volume (a huge component of the region for recreation, tourism, and business and conference activity) fell 97 percent before nearly halfway recouping to 55 percent below its pre-pandemic level (3.875 million visitors to 125,000, then back to 1.75 million). These are all annualized benchmark trends.

It’s no surprise that Clark County gaming revenue plunged earlier this year before bouncing back significantly. From an annualized perspective, this figure fell 100 percent from $875 million to zero before popping back up to $625 million — recouping well over halfway, although still 29 percent below its pre-pandemic level and trending at an amount not seen since the early 2000s. Gaming revenue and retail/leisure/recreation purchases play a huge role in local government tax revenue and spending, as evidenced by the Clark County taxable sales index (which fell noticeably before halfway recovering this past year). Annualized, this taxable sales figure plunged 41 percent before rebounding back to a level where it’s now 12 percent below its pre-pandemic level.

Total Las Vegas regional payroll employment has only recovered nearly halfway from its COVID-19 recession decline earlier this year, although the local labor market data is still “noisy.” That’s because many workers are still furloughed-yet-employed, while others are furloughed but won’t be employed going into 2021 (and some workers have left the labor force — the number of local adults who are willing and able to work — such as mothers, forced retirees, or others). Payroll employment hit a record peak in 2019 before plunging 25 percent in early 2020, but it has since recovered to 13 percent below its pre-pandemic level. The local “real” unemployment rate as of Oct. 31 is hard to pinpoint due to this noise in underlying labor market figures; however, it currently stands at 12 percent (down from 12.5 percent in September but up from 3.7 percent compared to October 2019). That’s after it spiked to 34 percent when COVID-19 hit the economy in springtime (the Las Vegas and Honolulu labor markets were the worst hit nationwide due to their concentration of tourism, travel, leisure, hospitality, and recreational job markets).

The Las Vegas region remains No. 4 in housing opportunity (“local affordability”) compared to six other metropolitan areas across the Mountain West, according to an index compiled by the National Association of Homebuilders. Although home affordability has declined in all regions since 2012, it continues to remain elevated (yet in the middle of the pack) in Southern Nevada for a variety of reasons — especially the relative comparison of lower job wages in the Las Vegas region to local home prices in contrast with local wages/home prices elsewhere. Albuquerque is No. 1 in “local affordability” (the cheapest relative to local job wages); Phoenix-Mesa-Scottsdale is No. 2; Salt Lake City is No. 3; Denver-Aurora-Lakewood is No. 5; Reno-Sparks is No. 6; and Los Angeles-Long Beach-Glendale is No. 7 (the most expensive). This index looks at the share of homes sold in an area that would have been affordable to a family earning the local median income, based on standard mortgage underwriting criteria. Feeding into this trend is the fact that annual home price growth in the Las Vegas region is nearly in the middle of all western mountain and coastal metropolitan regions since 2012 (including Denver, San Francisco, Seattle, Portland, Los Angeles, Phoenix, and San Diego) — not too high, but not the lowest.

You can view the presentation slides from the conference, courtesy of the Center for Business and Economic Research at the Lee Business School (at University of Nevada — Las Vegas). Make sure to click here to see more trends and graphical visuals of what’s going on in the local economy.

You can also view the additional presentation slides from the same event, courtesy of Beacon Economics. Please click here to view Las Vegas/Southern Nevada trends on consumer spending; investments (structures, equipment, intellectual property, and residential buildings); commercial real estate and investment; housing starts, permits and prices; consumer and business loan delinquencies; lagging economic/sector indicators; business activity and gaming revenue; hotels and visitors; employment/jobs industry breakdown, labor force growth and unemployment versus job openings; and small business applications.

RCG Economics (consulting firm)
Released in early December and will be posted soon (see November 2020 Job Flash Report when posted):

According to the pre-release, the latest employment data for Southern Nevada shows slow/steady job growth. The Las Vegas regional unemployment rate (people out of work within the group of those willing and able to work) declined from 13.8 percent in August to 12 percent in October. Click here to see latest November report (being posted soon) for more trends in Las Vegas and Nevada job market comparisons, weekly inflation-adjusted wages, industry/job breakdown, jobs index, private jobs versus total payroll jobs, rank by metropolitan area, and other year-over-year trends.

NV Department of Employment, Training and Rehabilitation (DETR)
Released Dec. 4 (Unemployment Insurance Claims Press Release): 

Nevada’s initial claims for unemployment insurance recently fell to the lowest monthly number of claims filed since mid-March 2020. Make sure to click here to read more, and also see data and information on continuing claims.

Southern Nevada: Demographics, Labor, Education & Economic Resources

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