When celebrity chef Wolfgang Puck opened Spago in the Forum Shops at Caesars Palace in 1992, few believed his fine-dining restaurant could survive in a city known for $1.99 steak-and-eggs specials and all-you-can-eat buffets. Yet Spago not only survived, it thrived, leading a wave of culinary expansion that has elevated Las Vegas among the top cities for fine dining experiences. Nearly 25 years after Puck opened his restaurant, Las Vegas is home to one of the finest collections of world-renowned chefs and restaurants anywhere on the planet.
The growth of fine dining has been central to the ongoing evolution of Las Vegas. As legalized gambling has expanded across the United States and the globe, Las Vegas has responded by expanding its amenities beyond gaming to maintain its position as a top tourist destination. Two decades ago, gaming revenue made up more than half of all revenue for resort hotels along the Las Vegas Strip. Today, gaming accounts for just a third of all revenue. With the development of high-end shopping centers, world-class venues that draw the biggest names in entertainment, and restaurants headed by the top chefs in the culinary world, non-gaming revenue today makes up the majority of revenue. Since 1995, food revenues alone have grown from 11 percent to 16 percent of total resort revenue.
While the growing selection of fine dining destinations has been a boon for Las Vegas tourism, the benefits don’t end there. Local residents now have access to the world’s best cuisine via a short car ride. Two decades ago, that would have required a trip to Los Angeles or New York. Additionally, restaurants and bars have provided economic opportunities and jobs for southern Nevadans as they proliferated before the Great Recession and, following just a brief decline, after the downturn, became a $10 billion industry in southern Nevada.
Full-service restaurants, which include everything from the celebrity chef establishments on the Strip to neighborhood diners, make up about a third of the sector. Since 2002, the number of full-service restaurants in southern Nevada has nearly doubled from 760 to 1,410, which isn’t all that surprising when you consider that Americans are spending more on dining out than ever before. Employment growth at those restaurants has followed a similar trend, expanding from 25,440 jobs in 2002 to 47,870 jobs that paid $1.2 billion in wages last year.
Whether it’s a high-end restaurant run by a Food Network star or a modest family-owned restaurant around the corner, the bottom line of southern Nevada’s growing restaurant industry is that we have many more choices for eating out today than just a decade ago. That’s great news for our economy and our appetites.
It seems like I can’t drive anywhere these days without seeing construction cones. Like anyone else trying to get home, to work or to the store amid the sea of orange on southern Nevada’s roads, I share the frustration with stop-and-go traffic, closed lanes, detours and delays. It can be easy to miss the positives of construction when you’re on the fourth light cycle waiting to get through an intersection, but the wave of ongoing road building is a welcome sign that our economy is not only back, but also preparing for the future.
Infrastructure is one of the most important elements of a successful economy. A comprehensive and well-maintained road and highway network is critical to the safe and efficient flow of commerce, whether it’s moving workers to job sites, consumers to stores, or goods and materials to retail and commercial centers. It also enhances quality of life by reducing the amount of time we’re stuck in our cars each day. That congestion costs our community more than a billion dollars in lost time and wasted fuel.
Southern Nevada’s road building boom has been made possible in part by the rebound in the overall economy, but the biggest factor has been the implementation of fuel revenue indexing. Since 2014, indexing has raised the local gasoline tax based on annual inflation. That 3-cents-per-gallon increase each year has generated hundreds of millions of dollars that the Regional Transportation Commission of Southern Nevada is using to fund literally hundreds of needed road projects, including $79.7 million for Interstate 11-related construction, $29.5 million to upgrade the McCarran International Airport connector, $43.2 million to bring the northern stretch of the 215 Beltway up to freeway standards, and dozens of other projects from traffic light installations to pedestrian safety improvements.
When the Clark County Commission approved fuel revenue indexing in 2013, RTC officials estimated the program would support about 200 projects costing between $700 million and $800 million. Thanks to rising gas consumption and lower construction costs, the program has already provided $695 million in funding for more than 220 projects across the region. I should note that without fuel tax indexing, the RTC would have had just $22.4 million available each year for new projects. At the cost of an extra dime per gallon of gas, the indexing program had greatly improved our transportation infrastructure quality and capacity while creating about 9,000 construction jobs.
The initial three-year fuel revenue indexing program is set to expire at the end of this year, but in November Clark County voters will need to decide whether to extend the program for another 10 years. The extension would provide an estimated $3 billion for a sizable backlog of transportation infrastructure. While it might be difficult to imagine another decade of road construction seasons, the investment will help southern Nevada’s transportation network keep pace with the community’s expected population and economic growth.
Fuel revenue indexing was originally conceived as equal parts infrastructure investment and economic stimulus. It has worked better than intended on both fronts. Perhaps most importantly these investments will help us avoid some of the pitfalls of communities that have failed to proactively address transportation (looking at you Los Angeles, Honolulu and Miami).
It might be difficult to show any affection toward the orange construction cones that have become a semi-permanent part of our lives. But the next time you find yourself in a detour or navigating a lane shift through a construction zone, remember what those orange cones symbolize and how they will eventually make our community better. Maybe, instead of cursing them, you just might want to take a moment and consider where we would be without them.
Today if you need to get around town, you might hail an Uber car to come pick you up. In the future, you very well might hail a driverless drone taxi to pick you up and fly you to your destination. That's the plan of a Chinese company called EHang, which recently agreed to move to Nevada to develop its autonomous aerial system. Officials with the Governor's Office of Economic Development and the Nevada Institute of Autonomous Systems first saw EHang's technology in Las Vegas during the Consumer Electronics Show in January. Just six months later, EHang is bringing its testing and development program to the Silver State.
While the idea of riding in a drone taxi with nobody at the controls won't appeal to everyone, the arrival of EHang marks another milestone in Nevada's ongoing development of its autonomous system industry.
In May, a project by the Desert Research Institute performed the first successful cloud-seeding test flight using a fixed-wing unmanned aircraft at the Hawthorne Industrial Airport in northern Nevada. The project is studying the effects of drought and possible solutions to shrinking water resources.
In April, Nevada and NASA announced a new partnership to create the Nevada Unmanned, Autonomous, and NextGen Collaborative Environment (NUANCE). The program teams NASA researchers and students at the University of Nevada, Reno to perform drone simulations that will be used to develop an air traffic control system for smaller unmanned aircraft.
In March, Hawthorne was the site of the nationâ€™s first package delivery by an autonomous drone in an urban setting. The delivery was conducted by Flirtey, an Australian company researching and developing a drone delivery service in partnership with the University of Nevada, Reno.
Four straight months. Four significant developments. And those don't include the January creation of the Center for Advanced Mobility, a state initiative under the Nevada Institute of Autonomous Systems focused on researching and testing self-driving ground-based vehicles.
These advancements are hardly an accident. When Governor Brian Sandoval took office in 2011, he made development of unmanned aerial systems and autonomous vehicles a priority. With more than 300 sunny days a year, vast unpopulated areas, a history of unmanned military flight operations and more restricted airspace than all other states combined, Nevada had several built-in advantages conducive to the unmanned aerial systems industry. The Federal Aviation Administration agreed, making Nevada one of just six locations where unmanned aerial systems could be flown and tested in 2013. That designation, along with the leadership and guidance from the Governor's Office of Economic Development and the Nevada Institute of Autonomous Systems, has pushed Nevada to the national forefront of testing and developing unmanned aerial systems.
Nevada has also been leading the pack when it comes to autonomous vehicles. In 2011, it became the first state to allow driverless cars on its roadways, which opened the doors to companies, notably Google, to test their vehicles in the state. Since then, automakers Tesla and Faraday Future, which each have self-driving vehicle technology, have moved into the state, and the Center for Advanced Mobility was created to firmly establish Nevada as the national leader for developing, testing and building autonomous vehicles.
In just a short time, Nevada has moved to the forefront of the autonomous vehicle industry, bringing innovation and diversification to an economy that desperately needed them. Thanks to the forward thinking and commitment by leaders in government, education and private industry, the state is poised to solidify its position in the field, thereby attracting (and retaining) more bright minds, more cutting-edge technologies and more economic opportunities to push the envelope of this advanced industry. I don't know what the next big innovation in autonomous systems will be, but I have a feeling that Nevada will somehow be in the middle of it.
Last month, more than 20,000 young robotics enthusiasts from 42 countries converged on St. Louis for the FIRST World Robotics Championships. Among them was a group of students from Cimarron-Memorial High School known as Team 987. The team, whose nickname is the High Rollers, has developed into one of the top high school robotics teams in the world. A year ago, the High Rollers made it to the world finals before finishing in second place; and earlier this year, they won regional competitions in Los Angeles, and in their own backyard, here in Las Vegas.
The High Rollers didn’t win this year’s world championship, but they brought home the coveted Chairman’s Award, the highest honor given out at the event. This award honors the team that best represents a model for other teams to emulate, and embodies the purpose and goals of FIRST (For Inspiration and Recognition of Science and Technology). It was well-deserved recognition for a program that started as an extracurricular club 15 years ago in a small school storage room with two mentors and 10 eager students. The fledging robotics team has come a long way since then by tapping into the curiosity of young minds and helping them cultivate skills in engineering and computer coding.
Today, the program has progressed into a full-fledged academic course, and as Team 987 expanded, so did its reach throughout the community. Team members helped establish FIRST Nevada and regional competitions, started workshops and camps for younger students, and helped develop a robotics curriculum that is currently used at 21 elementary, middle and high schools across Nevada. The High Rollers have traveled overseas to share knowledge and camaraderie with international students. They have also worked diligently to recruit girls into the program. Today, 15 of the 32 team members are female, a notable and important achievement considering the traditionally male-dominated STEM (Science, Technology, Engineering and Math) industries.
These initiatives, both on campus and off, have helped send numerous Nevada students off to college and into careers in STEM-related fields. That success attracted the attention of state officials who provided $750,000 in grant monies to create a new Manufacturing Technology Academy at Cimarron-Memorial. When it opens this fall, the magnet program will serve as a training ground for students entering various STEM-related fields and prepare them to step into positions with high-tech companies, like Tesla and Faraday Future, which are central to Nevada’s economic diversification plan.
Education and workforce development are perhaps the two most important pieces to the state’s economic strategy, especially when it comes to high-tech and STEM-related industries. Our state and local economic development agencies can offer many types of incentives to attract companies in these desirable sectors, but without a pool of potential workers to hire from, companies will be reluctant to relocate. The young men and women of Team 987 are proving to the world that Nevada is home to some of the brightest young minds on the planet, and if given the right opportunities and instruction, they can compete with anyone, anywhere. They also inspire younger generations by exposing them to robotics, engineering and other STEM specialties, creating a “virtuous” cycle that will elevate Nevada, both educationally and economically, for many future generations.
Nevada’s run of employment growth last year made headlines with the release of each month’s job report. The consistent growth kept our state ranked at or near the top of national rankings, and we finished 2015 with the country’s sixth-best job growth rate (3.1%).
That kind of economic news is always welcome.
Perhaps just as welcome, and even a little surprising, is the news about Nevada’s surge in weekly wages. This might be one of the most important measures of our economic health, and the Silver State closed the year with the best wage growth of any state. Average weekly wages climbed 5.2 percent in 2015, raising the typical worker’s annual earnings by nearly $1,900.
Arguably the best news behind those numbers is that the rise has been fueled not by more hours at work (those have remained fl at), but by strong growth in hourly pay. In fact, Nevada’s workers are getting paid, on average, an extra dollar per hour compared to a year ago.
What’s happening here is a microcosm of what we are witnessing across the United States. The economy is growing, unemployment is falling and, at present, there are more jobs than workers. This is a far cry from the depths of the economic crisis, when there were far more workers than jobs. The result: today’s employers that are looking to add positions or fi ll vacancies or even keep employees are finding themselves competing over a shrinking pool of potential labor.
And how do they compete? By raising wages and salaries.
If recent trends are any indication, the competition for employees doesn’t appear to be slowing down anytime soon. In December 2015, more Americans voluntarily quit their jobs than in any month since before the recession, and the 3.1 million people who quit was nearly double the number of workers who were laid off that same month. This labor market is clearly a seller’s market.
Here in Nevada, workers are reaping the rewards, but the economic benefits don’t end with their larger weekly paychecks. As workers see their fortunes rise both in terms of job security and earning potential, they are more likely to spend their additional income throughout the economy. From grocery stores to movie theaters to car dealerships, the entire state economy appears to be profiting from the ripple effect of workers’ newfound discretionary income.
Over the past year, job and wage growth have spearheaded the best year for Nevada’s economy in nearly a decade. With new businesses opening and more jobs being created, workers should continue to see more opportunities and better pay. And that means more good things for our state economy.
Las Vegas was built on “What ifs?” From its earliest days as a lonely stop along a dusty railroad track through the current megaresort era, Las Vegas grew and developed because someone with a vision first asked “What if?” That question is as relevant as ever for the city of North Las Vegas, which is trying to rebound from the housing collapse and subsequent recession that put the city on the brink of insolvency and a state takeover. Even with some recent improvements, the city’s financial picture is far from rosy, but what if the script about North Las Vegas’ demise is being rewritten?
What if southern Nevada was again among the fastest-growing areas in the country, and the bulk of the region’s undeveloped land was sitting within North Las Vegas’ city limits? What if the lower cost of land and development made the city more attractive to developers? What if the affordability and availability of homes made North Las Vegas a desirable bedroom community, especially for workers looking for easy access to jobs in burgeoning downtown Las Vegas?
What if southern Nevada lacked warehouse and distribution spaces larger than 50,000 square feet, and North Las Vegas became the region’s hotbed for large industrial center development? What if electric automaker Faraday Future’s $1 billion factory became the nucleus of a long-awaited economic development boom at Apex Industrial Park? And, what if Faraday and Hyperloop Technologies were merely foreshadowing Apex’s potential to become something akin to Silicon Valley for futuristic transportation research and development?
What if southern Nevada’s health care sector was woefully underserved, and North Las Vegas had a Veterans Administration hospital that could anchor a new medical district on the northern edge of the valley? What if unmanned aerial vehicles were a cutting edge technology that had federal approval for testing in just a handful of states, including Nevada? And, what if North Las Vegas was located near a critical Air Force base, a national test site and a military base used for development and deployment of drones?
What if people are underestimating North Las Vegas and its ambitious rebound projects in the same way they underestimated the chances of a railroad town in the middle of the desert a century ago?
With operations on five continents, Barrick Gold Corporation is known around the globe as the world’s largest gold producer. Company holdings include three mines with 4,000 employees in Northern Nevada, where it has operated for nearly three decades. Despite that long history in the Silver State, for most of it Barrick had no presence in Southern Nevada.
That changed in September when the Toronto-based company opened an office in Henderson to house its global information technology, finance, supply, environmental and energy teams. The relocation was clinched thanks to local data center powerhouse Switch and its vast IT infrastructure, which supports hundreds of the country’s largest and most connected companies. The new Barrick office is now home to about 80 employees earning well-above average salaries—a definite win for economic diversification in Southern Nevada.
Notably, Barrick’s positive role in the region goes well beyond the new jobs it created. The company has invested heavily in community philanthropic and economic development efforts that will enhance the quality of life for Southern Nevadans for years to come. Barrick supports organizations such as Communities in Schools, Three Square Food Bank, Opportunity Village, Nevada Ballet Theatre, Foundation for an Independent Tomorrow, and even the UNLV volleyball program. On top of that, Michael Brown, Barrick’s president in the United States, spearheaded the creation of the Nevada Corporate Giving Council, which aims to improve and enhance corporate philanthropy strategies and campaigns throughout the state. Barrick also supports the Las Vegas Global Economic Alliance’s “Engage Southern Nevada” investment campaign, which seeks to raise $7.5 million for regional economic development.
The success of Barrick’s growing footprint in Southern Nevada is a testament to the company’s vision and dedication to the community. Every company we bring to the state or region is a victory for economic development and diversification, but we should seek more companies that, like Barrick, bring a philosophy and commitment to community investment that goes beyond employee wages and business infrastructure. Greater investment in the community helps develop deeper roots and connections for both the community and the company.
We can also look at the Barrick relocation as a prime example of maximizing our regional resources to not only attract new businesses, but also to find ways to expand existing ones. Tax abatements and other state support will always play a role in recruiting companies to Nevada, but many other states can and do offer similar or even better incentives. The best kind of economic development involves expanding existing businesses, and the best incentive we can offer them is a quality community that includes a robust workforce, a high quality of life, and unique business assets, such as the information technology resources of Switch and the global connectivity made possible by McCarran International Airport. By making Nevada a more attractive place not just for businesses but for their employees, we enhance our prospects as a viable location for future company relocations and expansions.
Barrick is an international company that could have moved anywhere in the world; it chose Henderson. As an existing company that expanded in Nevada because of the opportunities it found here, Barrick’s expansion represents exactly what we want our economic development to become.
At this time of year, we look forward to New Year's Eve celebrations to close out the year and start anew. We prepare to turn the calendar, make resolutions and set new goals, all with an underlying optimism that in another 12 months we will be better off than we are today.
When I look back at what we achieved as a state in 2015, I have no doubt that we are better off now than a year ago. That hasn't always been the case, especially during the depths of the economic downturn that hit Nevada harder and longer than most everywhere else. During that time, each passing year seemed to leave us worse off than the one before, and yet we went into each new year with the hope that it would be the one that fi nally reversed the trend.
Thankfully, those days are well behind us. Over the past few years, the majority of our key economic indicators regained all or most of the ground that they lost during the downturn, and in some cases, all-time highs are again being set. In fact, many indicators in Nevada have outperformed most of the nation. Job growth is a shining example.
In October, Nevada was 42,100 jobs ahead of last year, generating an annual employment growth rate of 3.3 percent. That rate was better than all but two other states and well ahead of the national average. Job growth has gone hand in hand with private business growth, which climbed 3.5 percent in the second quarter by adding 2,625 new businesses over the previous year. During the same timeframe, personal income in the state rose by $6 billion.
The state's core tourism industry has been integral to these positive trends. Through October, Las Vegas was on pace to add another one million annual visitors in 2015 and set an all-time high for the second consecutive year. That record would not be possible without a surge in passenger traffi c at McCarran International Airport, which is approaching 45 million for the year after reaching 43 million in 2014.
Consumer spending and housing prices continued their strong trends in 2015, as well. Statewide annual taxable retail sales reached a record $51 billion in September, while Nevada's home prices appreciated more than 12 percent in the third quarter over the previous year, the second-best rate in the nation.
The year also saw a variety of new development announcements and beginnings. Added to the list of ongoing projects, they reinforce rising confi dence in the long-term economic future of our state. That list includes the Las Vegas Arena, Alon Las Vegas resort, Resorts World Vegas, the Las Vegas Convention District, new convention space at Aria, Swedish furniture store IKEA, Hyperloop and Faraday in North Las Vegas, and a UNLV school of medicine, among others.
As these many milestones in 2015 make clear, we have entered a period of building instead of rebuilding. We are no longer recovering from the damage wrought by the Great Recession. Instead, we are building upon a new foundation of stability and growth, and success will be measured not by how far we've come but by how far we go.
As we say goodbye to 2015, here's to our successes of the past year and to the hope that next year will be even better.
Nevada’s corporate community has a long tradition of philanthropy throughout the Silver State. That tradition of giving was perhaps no more important than in the recent past as our state took the brunt of the Great Recession and its aftermath. As our unemployment rate skyrocketed to a nation-leading 14 percent, thousands of people lost their jobs, and much- needed public services and charitable causes struggled with tighter budgets and soaring caseloads.
During these times of great need, Nevada’s companies stepped in to provide financial donations and volunteer hours in support of all-important community charities and nonprofit groups, even as they wrestled with their own cutbacks and tightening bottom lines. Although the state’s economic picture has improved much since then, the need for private-sector philanthropy remains high. Thankfully, our corporate community remains engaged in doing its part.
In 2013, companies throughout the state donated an estimated $134 million to charitable causes. As a share of company revenues, that amount represented nearly twice the national average corporate giving rate, according to a recent survey commissioned by the Nevada Corporate Giving Council. These donations support a wide variety of community programs and needs, including health and social services, culture and arts, education, and the environment.
Corporate giving doesn’t stop with financial donations, either. Eight in 10 companies surveyed also supported and encouraged volunteering through specific programs, including paid time off for volunteer activities and company- sponsored volunteer events. During the survey period, Nevada’s companies contributed 260,240 volunteer hours, the equivalent of 125 employees working full time for an entire year.
Many companies are involved in charitable giving, including some of the state’s most recognizable entities. MGM Resorts International donates a specific percentage of company profits to a variety of programs, provides an employee-funded foundation where employees can donate to their charities of choice, and encourages employee volunteerism. Barrick Gold supports nonprofit agencies in communities around the globe, including the Foundation for an Independent Tomorrow in Las Vegas. NV Energy sponsors volunteer days and awards financial grants in support of hundreds of nonprofits across the state. Station Casinos partners with at-risk local schools, providing financial support, volunteers, mentors, and donations.
This is just a sampling of the many charitable efforts companies support each and every day in our state. These efforts should only improve with the assistance of the Nevada Corporate Giving Council, which is led by top executives at Barrick Gold, MGM Resorts International, and NV Energy. The council’s mission is focused on tracking corporate philanthropy throughout the state, sharing best practices, and collaborating on charitable giving initiatives to better the community.
Through the years, Nevada’s companies, large and small, have proved their commitment to philanthropy. Going forward, greater collaboration and communication when it comes to charitable giving will only strengthen this commitment, and ongoing corporate philanthropic initiatives will tighten the bond between the state’s business entities and the communities they serve.
Throughout much of its history, Nevada’s independent streak, entrepreneurial spirit and economic opportunities have attracted people from all over the world. Today, it seems as if everyone in the state is from somewhere else, and to a large degree that’s true. Nevada has a lower share of native residents than anywhere else in the United States, with just one in four Silver State residents being born here. A little more than half of Nevadans were born in another state. One in five residents is foreign-born, the fifth-highest rate in the U.S.
Nevada has a long history of welcoming residents from beyond our nation’s borders. Through the first half of the 20th century, Italians were Nevada’s largest immigrant group, according to the Pew Research Center. Canadians held that designation for a couple of decades before Mexicans took the top spot in 1980. Since then, our nation’s southern neighbor has remained the primary source of immigrants in Nevada and nationwide. Hispanics, born either in the U.S. or abroad, represent Nevada’s largest minority group, making up 28 percent of the population, a threefold increase from 1990.
The influence of the large and growing Hispanic population is evident from the strip malls of northwest Las Vegas to the Governor’s Mansion in Carson City. However, the state has reported significant growth in other minority populations. Over the past decade, the Asian population has grown by 60 percent and now accounts for close to 8 percent of total population, and the African American population, which expanded by 39 percent, also makes up 8 percent of the state’s residents. However, neither grew as much as multiracial residents, who grew by 82 percent in the past 10 years, adding more total residents than the state’s white population.
The expanding multicultural landscape of the state, and especially southern Nevada, is evident in the annual events calendar, which is peppered with heritage festivals and events that celebrate that diversity. The Chinese New Year, Mexican Independence Day and Cinco de Mayo bring celebrations every year, while locals can enjoy festivals featuring culture and food from Greece, Italy, Hawaii, Japan, Puerto Rico, the Philippines and Brazil, among others.
This cultural diversity extends to our neighborhoods and our schools. A recent study by Pennsylvania State University researchers found Las Vegas was the seventh-most diverse metropolitan area in the country. Meanwhile, our flagship institution of higher learning, the University of Nevada, Las Vegas, was named the second-most diverse university in the nation in the annual rankings by U.S. News and World Report. It was UNLV’s fifth straight year in the top 10.
Our state’s growing diversity comes with its challenges, such as educating the large numbers of students learning English. That said, the overall positives far outweigh those challenges and create a richer cultural experience for everyone in the state. The face of Nevada is changing, just as it has always done. It is who we are, and it is who we will be. That’s something we should embrace and celebrate.
Southern Nevada is known as a region of constant transformation. For many decades, its status as a modern- day boomtown attracted residents, businesses, and investments seeking to capitalize on the region’s rapid expansion. That growth was evident in the ubiquitous high-rise construction cranes transforming the skyline of the Las Vegas Strip and the earth movers priming desert lots for new subdivisions and shopping centers.
During the Great Recession and in the years that followed, the signs of transformation were replaced by signs of stagnation. Planned developments were scrapped or suspended, and the construction cranes and earth movers vanished, leaving behind the unfinished skeletons of half-built projects and still- empty desert lots.
Throughout the downturn, southern Nevada persevered, and as the national and world economies recovered, so did Nevada’s. Jobs and businesses have returned, as have the cranes, earth movers and construction workers that are again transforming the region’s landscape. These changes have been fueled by the return of investments in new resort hotels, shopping centers, industrial centers, and other building projects.
Last year marked a milestone in the economic turnaround, as major projects such as SLS Las Vegas, the LINQ and the High Roller, and Downtown Summerlin were completed. Those three projects alone represented more than $2 billion in investment. Other recently completed projects include the $172-million Wyndham Desert Blue resort, the $100-million renovation of Westgate Las Vegas, and the $55-million Bellagio room remodel.
The upward trend has only grown stronger, as currently planned or under- construction projects in southern Nevada total more than $12 billion in investment. Those include high-profile projects such as the $375-million Las Vegas Arena, the $2.3-billion Global Business District, the $1.4-billion All Net Resort and Arena, the $4-billion Resorts World Las Vegas hotel, the $373-million Lucky Dragon boutique hotel, and a $47-million renovation of the Thomas & Mack Center.
The investment pipeline extends well beyond the confines of the Strip, as well. Several local shopping centers, including Las Vegas Premium Outlets North, Galleria at Sunset, Boulevard Mall and Tivoli Village have completed or are undergoing renovations or expansions. Meanwhile, iconic Swedish furniture retailer IKEA will open its 351,000-square-foot Las Vegas store next year.
Available land and opportunities have attracted significant investment in new industrial building construction as well. That includes a $1-billion expansion for Las Vegas-based technology giant Switch Communications, the $34-million Republic Services Recycling Center, and a new North American headquarters for Ainsworth Gaming Technology. Notably, about 2.0 million square feet of new industrial space is under construction on a speculative basis, meaning it will be built without committed tenants. This list includes the $32-million Jones Corporate Park, Henderson Freeways Crossing, Lone Mountain Corporate Center, and others.
The list of current and planned investments includes many other commercial developments across southern Nevada, and the investment total grows even more with the inclusion of major projects in northern Nevada, such as $5-billion Tesla Gigafactory and Switch’s $1 billion expansion there. These investments are a testament to how far the state has come since the depths of the economic downturn and reflect the belief that southern Nevada is once again a competitive and growing market.
After another long summer, students across southern Nevada are heading back to campus for the new academic year. In Clark County, most of the 320,000 public school students will attend their neighborhood campuses and learn the typical curriculum. However, about 24,000 students will be enrolled in the Clark County School District’s magnet schools or career and technical academies. In addition to teaching the standard curriculum, these specialized programs offer students unique educational opportunities that add to their personal development, help jump start their careers, and prepare them for working in high- demand emerging industries.
The district offers more than 60 programs at 32 elementary, middle and high schools, including math and science, law, video game design, nursing, visual and performing arts, international studies, and hospitality and tourism. Many of these programs focus on in-demand or emerging industries, such as healthcare, information technology and aerospace engineering, thus creating a workforce that is better-equipped as the southern Nevada economy diversifies.
Magnet schools and career and technical academies have a consistent record of academic success, with students routinely outperforming their peers in the classroom and in standardized testing. In Clark County they have also been recognized as among the best in the country by Magnet Schools of America, an organization that recognizes the top public magnet schools each year. Earlier this year, the group handed its top award for excellence to 15 of Clark County’s magnet programs. Another six programs earned the second-highest award.
That track record of success has put the district’s magnet programs in high demand for students and their families. In 2014, the district received 16,700 student applications for only 5,700 open spots. In an effort to help satisfy that demand while easing overcrowding at some schools, the district is expanding the magnet program, adding seven schools this year and another four next year. Those new programs will add 4,800 openings that district officials hope draw students from overcrowded schools to the new magnet programs, which were placed at campuses with extra room for students. The district also created the Select Schools program, which added career and technical training and Advanced Placement courses at five standard high schools. Together, these changes mean more students will have access to these specialized education programs.
The ongoing success and development of magnet schools and career and technical academies are a significant bright spot for southern Nevada education. As the fifth-largest school district in the country, the Clark County School District has many challenges to tackle to improve student performance, but the magnet schools and career and technical academies program is not one of them. The program’s history of success should be celebrated, and its expansion should be encouraged as it continues to grow and develop new academic programs that satisfy the demands of students and the community alike.
Imagine robots wheeling down the halls of Las Vegas’s largest hotels, delivering room service and turning down beds. Imagine a real-life Tomorrowland that showcases the cutting-edge technology of robotics and unmanned aerial vehicles. Imagine a university where the world’s best and brightest engineering students and professors create robots for the front lines of disaster response.
Welcome to the world of Dr. Paul Oh, who has not only imagined these scenarios, but is making them a reality as the Lincy Professor of Unmanned Aerial Systems at the University of Nevada, Las Vegas. Oh came to UNLV a year ago from Drexel University in Philadelphia, where his work at the Autonomous Systems Laboratory made him one of the world’s foremost experts in robotics. He has also worked with Boeing and NASA’s Jet Propulsion Laboratory.
For UNLV, convincing Oh to move across the country wasn’t just luck of the draw. Oh was attracted by the commitment of the university, the governor’s office and private industry to develop the emerging technology and use it to diversify the economy. In 2011 Nevada was the first state to allow autonomous vehicles on public roads, making it an early testing ground for Google’s self-driving cars, and last year the state became one of just six sites approved by the Federal Aviation Administration for research and testing of unmanned aerial vehicles. Additionally, Creech Air Force Base, about an hour outside Las Vegas, has for years served as the military’s hub for unmanned drone flights around the globe. These and other developments positioned Nevada at the forefront of the autonomous vehicle industry, which helped convince Oh to move to Las Vegas, bringing his expertise and millions of dollars in federal grant funding with him.
In less than a year, Oh has already made his mark. In June his team of students entered the prestigious U.S. Defense Advanced Research Projects Agency (DARPA) Challenge finals, an elite competition between the world’s best minds in robotics engineering. The goal of the challenge is to create robots that can respond to disaster areas, so the machines must be able to drive, open doors, climb stairs and other tasks. UNLV’s DRC-Hubo robot, named Metal Rebel, completed six of the eight tasks, placing it eighth in the field of 23 that included entries from the Massachusetts Institute of Technology and Carnegie Mellon University. Oh also recently helped UNLV secure a research and development partnership with Local Motors, a Phoenix-based company that manufactures vehicles with a 3D printer. As one of just three universities in the partnership program, UNLV received 3D-printed vehicles to use in research of autonomous technology as well as advanced materials for additive manufacturing of vehicles.
Oh aims to do far more than win robotics competitions or drive around in high- tech cars. Using the disasters of the 9/11 terrorist attacks and Hurricane Katrina as motivation, he wants to change the world for the better by creating robots that improve disaster response efforts and help save lives. His robots will have other applications, as well. He sees a growing market for autonomous robots in many other areas of the economy, including the hotel industry, agriculture and warehousing distribution. These ongoing developments and partnerships between UNLV, government and private industry will generate new opportunities to create jobs, attract in-demand knowledge workers, diversify the economy, and even make the world a more attractive place. In September, Metal Rebel will be at the Life is Beautiful music festival, drawing art on one of the walls.
In just one short year, Dr. Oh has transformed southern Nevada’s potential for robotics and autonomous vehicle research and economic development. Imagine what he’ll do in the years to come.
Throughout southern Nevada’s history, the home building industry has served as a measuring stick for the health of the overall economy. During decades of economic boom, new homes were built by the tens of thousands each year to meet the needs of an ever-growing community that was attracting new residents with plentiful job opportunities and one of the lowest costs of living in the western United States. The home building boom reached its peak in mid-2006 before plunging by half in the following year. Few would understand just how far reaching the nancial crisis would become, but the dramatic tumble in home building would be an ominous harbinger of the brutal recession to come.
In the wake of the Great Recession, new home activity in Clark County bottomed out in mid-2011 at fewer than 5,000 units, 90 percent below the peak. Many home builders couldn’t survive the fall and were swallowed up by other builders or closed for good. However, some companies did survive and weathered the economic downturn when everyone counted them out. Many of the surviving builders are arguably stronger today, as severe nancial hardship led to streamlined operations and new building strategies focused on more stable, more sustainable growth.
Home builders are also better prepared to meet the demands of the current new-home buyer, despite the attention being put on the price difference between new and existing homes. The current median sales price for a new home in the Las Vegas area is $298,375, while the median price of an existing home is $174,277. That 71-percent price gap is twice the national average and re ects the current trends in new home building in Las Vegas, which produce superior homes with larger lots, bigger oorplans, more technology and better energy ef ciency. On a per-square-foot basis, the cost difference of 22 percent is not nearly as stark and is in line with historical averages.
As home building has rebounded—currently about 10,000 units a year—so has construction employment. During most of the past 24 months, the construction sector has consistently enjoyed double-digit or near double-digit year-over-year job growth. In recent months, employment in construction has grown faster than in any other industry, and its most-recent 11.4-percent growth mark was more than twice the rate of any other sector. Other positive signs in the housing market include the ongoing rise of home prices in Nevada. The House Price Index has climbed for 13 straight quarters and is at its highest point since 2008. Also, the state’s home price appreciation over the past year ranked second in the nation, continuing the trend of a rst- or second-place ranking for 10 consecutive quarters.
These are all positive signs that show just how far the housing industry has come since the Great Recession. It is good news for the entire economy, as the housing industry that was once at the leading edge of the recession is now marking the end of a prolonged period of recovery.
Public safety is a top priority for every community across the nation. That's no less the case here in Nevada, where tourism drives our economic engine. From Las Vegas to Reno and everywhere in between, the Silver State annually attracts more than 50 million visitors who come to gamble, dine, dance, hike and enjoy many other activities. Nevada remains a top tourist destination not only because of the unique experiences and amenities it offers, but also because of the secure environment it provides for visitors from all over the world.
Crime trends show that our state has become safer in recent years, bucking the conventional wisdom that crime rises during economic turmoil. In fact, the state's overall crime rate climbed rapidly during the economic boom in the early 2000s before peaking in 2006. It gradually fell through the Great Recession and has remained relatively stable during the economic recovery.
In 2013 (the latest year available), the statewide crime rate had dropped by about a third from its level a decade earlier. Most of that improvement came from a dramatic fall in property crimes, though violent crime was slightly lower than where it stood shortly after the turn of the century. Those trends held true in southern Nevada, home to 73 percent of the state's residents and 84 percent of its visitors. In Clark County, the violent crime rate in the past few years was essentially unchanged from a decade ago, while property crime had fallen by roughly one-third.
Are these positive trends happenstance? I think not.
More officers on the streets means less crime. A decade ago, Clark County Sheriff Bill Young championed the More Cops sales tax to fund hundreds of additional officers across southern Nevada. As those officers were hired and put on the streets, the crime rates stopped growing and started shrinking, despite one of the worst economic environments in American history. Today, the More Cops sales tax is responsible for more than 800 extra officers, 25 percent of all local police officers in Clark County. Those additional officers helped southern Nevada police agencies weather a significant loss of officers from budget cuts made necessary by the severe loss of government tax revenues during the downturn.
Now Nevada has transitioned from a period of recession to one of recovery. While we probably won't see the exponential growth reported in the early 2000s anytime soon, Nevada is again among the top states in the nation for both population growth and employment growth. With more people calling Nevada home, policymakers and police officials will need to keep a watchful eye on crime trends and work to ensure the gains made in public safety during the last decade are not lost. Less crime is critical to the success of our all-important tourism industry, our economic development efforts and the quality of life for Nevada residents old and new.
From the outside, Touro University Nevada looks like just another warehouse in an industrial center at the southeast corner of the valley. But inside, the private nonprofit college is Nevada’s largest medical school. Since opening in 2004, the university has graduated more than 1,500 health care professionals. It started with 78 osteopathic medical students and has since grown to more than 1,300 students in programs such as nursing, physical therapy and other medical disciplines. Some of Touro’s programs, including master’s degrees in physician assistant studies and occupational therapy, are the only ones in Nevada.
For more than a decade, Touro has been working to fill some of Nevada’s most pressing health care needs. Our number of medical doctors and registered nurses per resident ranks among the worst in the nation. In fact, as a state we have only two-thirds of the medical professionals necessary just to meet the national average, and our population is again among the fastest-growing in America.
More help is on the horizon with the forthcoming UNLV School of Medicine, a new campus that will educate and train future doctors and nurses in Las Vegas with the hope most of them will stay after graduation. But the public medical school is still securing funding and won’t open for at least two years. That’s about the same timeline for a new College of Medicine planned by the private nonprofit Roseman University of Health Sciences.
Meanwhile, Touro University Nevada will continue with its mission of educating future doctors and nurses for a community that desperately needs them. But the school’s commitment to improving southern Nevada health care goes beyond the classroom. Touro runs a number of community outreach and clinical programs that help underserved and vulnerable people access health care. The school’s Mobile Healthcare Clinic makes regular visits to the Las Vegas homeless corridor to give basic health screenings and care. It runs a clinic at The Shade Tree shelter for battered women and children. Its Active Aging Center provides outreach and education for senior citizens, and its Center for Autism and Developmental Disabilities helps assess and treat children with developmental disabilities.
These are important medical services that would be left unfilled without Touro University Nevada. And they show the university’s commitment to southern Nevada both now and in the future, filling immediate health care gaps while educating the medical professionals who will serve our community and create a more diverse economy. Yet, the demand for medical education is still great. Touro University Nevada gets more than 3,000 applications each year for just 135 medical school spots. And of the 135 graduates, only 90 can train at the university’s residency program at Valley Hospital. Residencies are important because doctors tend to stay and practice in the city where they train.
Given our community’s looming needs now and into the foreseeable future, we should look at Touro University Nevada not as a competitor to the UNLV School of Medicine, but as a complement. That’s how Touro University officials see it, and they support the new medical school. The fact is, southern Nevada will require both private and public investment in our medical education infrastructure if we hope to not only meet the expanding health care needs of an aging population, but also continue to diversify our economy through a growing health care industry. The only surefire way to guarantee that our economy and health care system will fail to benefit from needed public and private investment is to support the belief that mutually beneficial investments are mutually exclusive.
Rising from the ashes of the Great Recession has not been easy for Nevada. The Silver State suffered harder and longer than most states under the combined negative effects of just about every key economic metric, from devastating unemployment and withering layoffs to crippling foreclosures and plunging home prices. Even as the state slowly emerged from those depths, we kept one eye on the rearview mirror, measuring every sign of economic recovery, no matter how small, against the specter of the Great Recession still looming behind us.
For half a decade, the signs of recovery trickled in. Unemployment dropped. Tourists returned. Homebuilders built. Home prices climbed. Businesses opened. Year after year, good news mixed with bad as some indicators showed promise and others lagged. Yet the momentum of recovery continued, and in 2014 the state reached a turning point, as many economic vital signs reached or neared pre-recession levels. In many respects, we could finally say, “Welcome back.”
Welcome back jobs; Nevada was third in job growth. Welcome back population growth; the state grew second fastest. Welcome back Las Vegas tourists, who hit a record 41.1 million. Welcome back home values, which rose faster than in any other state. Welcome back consumer spending, which hit levels not seen since 2007 in Clark County.
Sure, some areas have yet to recover. Convention attendance still lags. Gaming revenue is stagnant. Unemployment remains too high. Yet, as we head further into 2015 and beyond, the Great Recession is far enough behind us that we can take our eyes off the rearview mirror and turn our gaze to the road ahead and the opportunities over the horizon. And instead of saying, “Welcome back,” we can start saying, “Welcome forward.”
Welcome forward to a diversified economy where companies such as Tesla and Switch lead the way for continued expansion in high-tech industries, including aerospace and information technology. Welcome forward to better education for our children under Governor Brian Sandoval’s plan to remold the tax structure and generate hundreds of millions of dollars for schools.
Welcome forward to billions of dollars in new construction in the tourist corridor, including World Resorts Las Vegas, the Global Business District and the MGM/AEG Arena. Welcome forward to road projects such as Project Neon, which will untangle Las Vegas’ Spaghetti Bowl, and the Boulder City Bypass, the precursor to a Las Vegas-Phoenix interstate. Welcome forward to as many as 150,000 jobs in the next three years and the accompanying residents and homes and consumer spending they will generate.
We will not forget the pain of the Great Recession. Nor should we. However, our state and our economy have turned the corner. We are poised for new opportunities and growth. We are prepared to take advantage of emerging technologies and industries. We are putting the worst behind us and moving into a promising future.
Nevada has a reputation as a pro-business state. Too often, however, the term “pro-business” is thought to be little more than a politically correct way of saying “low tax.” While Nevada does have some of the lowest general business taxes in the nation—as well as no personal income tax—low taxes are far from the only reason that businesses are relocating to or expanding in the state. This was clearly evidenced in the November 2014 board meeting of the Governor’s Office of Economic Development.
Consider the comments from Don Ritzman, CEO of Ghost Systems, a leader in cybersecurity, which recently announced it would be developing its SafePlace ecosystem in northern Nevada. Noting that Ghost Systems evaluated a number of domestic and foreign markets for the location of its “key resources,” the company chose Nevada because it had the “ideal geographic location.” Mr. Ritzman also noted, “The kinds of products and services that [Ghost Systems delivers] to the marketplace require a very, very talented workforce” and the company was looking to leverage the state’s existing workforce and training capabilities. This is not to say that state incentives and a low-tax environment were not also important. Lower operating costs were expected to allow Ghost Systems to hire additional Nevada-based employees and roll out its SafePlace ecosystem 20 percent faster than would have been possible elsewhere.
Consider also comments from Johnnie Stoker, founder of K2 energy, an advanced lithium battery manufacturer founded in the City of Henderson in 2006. Internationally competitive and the sole supplier for the electromagnetic railgun program, K2 turned down $600,000 of incentives offered by the state of Texas because the company wanted to stay in Nevada. Mr. Stoker reaffirmed K2’s commitment to the state, noting that the company is actively working with UNLV as well as ITT Technical College on curriculum and technical projects because, as Mr. Stoker put it, “when you look at the next two to five years we’ve talked about hundreds of jobs and much more investment.”
Perhaps most notable are the comments made by Rob Roy, founder of Switch, arguably the most important technology startup in Nevada’s history. Governor Brian Sandoval asked Switch representatives about their experience with “getting local talent.” Mr. Roy, who recently announced a $2-billion expansion in both southern and northern Nevada, responded by saying that 85 percent of Switch’s employees are from the Silver State. He went on to say that the common perception that the education system and workforce in Nevada are not up to par is something they would tend to disagree with, as they have “grown one of the largest technology companies in the world” with 85 percent of their talent sourced to Nevada.
I doubt very much that Messrs. Ritzman, Stoker or Roy would disagree that Nevada needs to improve its K-12 education system or the technology programs in our colleges and universities. In fact, their investments and other actions would suggest just the opposite. Nevada’s economic development prowess, however, is more a function of the state’s strengths than its weaknesses and extend well beyond a low-tax operating environment. Building on those strengths, as opposed to resting upon them, will be the key to Nevada’s economic future.
The holidays came a bit early this year when, in late November, the price of regular gasoline dropped below $3.00 per gallon for the first time in four years. As of mid-December, the average price continued to drop to $2.68 per gallon, the lowest level reported since late-2009/early-2010.
At first blush, a few pennies at the pump may seem relatively insignificant. Consider, however, that total gasoline consumption in Clark County, Nevada is 760 million gallons per year. Thus, every penny decrease in the price of gasoline saves Nevada consumers about $7.6 million.
In mid-December, the price of regular gasoline was nearly 60 cents cheaper than it was at the same time last year; and, all told, during the past eight weeks, lower gasoline prices saved the typical southern Nevada household about $50. Multiplying that $50 figure by the roughly 720,000 southern Nevada households translates into $36 million of freed-up disposable income.
How are consumers spending the $36 million they just found in the couch cushions? Early reports would suggest they are spending it on holiday gifts, eating out and other discretionary items. In fact, the saving sourced to declines in gasoline prices arguably could not have come at a better time for Nevada’s retailers. The sharpest declines in prices since 2008 almost paralleled the start of the holiday shopping season. Nevada’s taxable retail sales in December tend to be about 20 percent higher than in a typical month. Giving people more money when they tend to consume the most is essentially the best-case scenario for traditional retailers.
It is not just Nevada households that are benefiting from the drop in gasoline prices. The cost of gasoline affects businesses, from landscapers to shipping companies. While prices would have to remain low for an extended period to stimulate increased business activity, a small business whose fuel cost is normally $6,500 per month adds incremental profit as the year comes to an end if its monthly fuel cost falls to $5,000; in a number of cases, this may result in increased spending on year-end celebrations or holiday bonuses.
Let’s also not forget about the 41 million visitors who will get on a plane or get into a car and come to Las Vegas during 2014. I have written previously about the danger in overestimating the implication of higher gas prices on visitor spending decisions; caution is similarly warranted as prices drop. That said, consumers have already adjusted to $3.50 gasoline by driving less, buying more fuel efficient vehicles and spending their money a bit differently. Lower prices tend to work a bit differently as consumers consider what they want versus what they might be willing to give up. We are looking for a late-year bump in visitor spending, including strong numbers for the important Wrangler National Finals Rodeo event, bolstered by favorable economic conditions, including, without limitation, lower fuel prices.
Lower gasoline prices are far from a panacea. What they are is a little bit of relief that could not have come at a better time for southern Nevada’s consumer-driven economy.
Perhaps the greatest sign of southern Nevada’s economic resurgence is the return of the consumer. During the past 12 months, Clark County’s taxable retail sales totaled $35.6 billion. This is only 2.2 percent below the $36.4 billion peak value reported at the end of 2007, as spending increased at an average rate of 8.5 percent during the past 12 months.
When consumers feel secure in their jobs, when their homes and retirement accounts are going up in value, and, for far too many, when their 20-something children finally have a job and leave home, they spend more. Consumer spending flattened in 2006, a full year before the economy went into recession. It then declined sharply from 2008 through early 2010 and has risen steadily since 2011, mirroring the pace and intensity of the region’s methodical recovery and reminding us that while “three economists can agree if two of them are dead,” consumers tend to provide a perfect barometer of the direction and strength of our consumption-driven economy.
Consumers are spending more in nearly every sales category. Durable and non-durable goods have both risen significantly during the past 12 months. Eating and drinking place and general merchandise store sales are back to pre-recession levels. Automobile sales have reported double-digit growth rates for most of the past two years; and, perhaps most notably, building materials and equipment sales also posted a higher-than-expected 7.5 percent growth rate during the past 12 months.
The sole exception to this trend among major taxable sales categories is in electronics and appliance stores. This sector rebounded well between 2010 and 2012, but has remained relatively fl at since. During the past 12 months, the category is down 1.6 percent.
At the other end of the spectrum are the curiously named “non-store” retailers, which reported a 45.8 percent increase during the past 12 months. Non-store retailers include Internet companies that collect taxes and remit them to the state. On January 1, 2014, Amazon began collecting Nevada sales taxes on most transactions, contributing significantly to the $150-million increase in non-store sales reported during the past 12 months. (Side note: consumers are actually required under Nevada State Law to remit the sales tax themselves to the Nevada Department of Taxation if the Internet retailer does not collect it — I am still looking for someone who has actually done this.)
Importantly, it is not just southern Nevada residents who have contributed to the rising tide of consumer spending; businesses and visitors have also done their part. Equipment sales and leasing services have both reported above average increases; concurrently, record numbers of visitors are spending more than ever on shopping, dining and drinking, bolstering both industry employment and taxable spending totals.
Heading into the all-important holiday season, consumers appear to be feeling better than they have at any point in the past fi ve years. Do not be surprised if December 2014’s total taxable retail sales spending totals break the $3.48 billion single-month record reported in December 2007. If realized, this would be the best sign yet that the economy has moved well past the recession.
Earlier this month the Nevada Department of Employment, Training and Rehabilitation reported that Nevada’s unemployment rate fell to a seasonally adjusted 7.3 percent. Down more than two full percentage points from the 9.6 percent reported just one year ago, the current rate is the lowest reported for the month of September since 2007.
Some will argue that the labor market is actually much better than the unemployment rate might suggest, noting that Nevada ranks among the nation’s highest in terms of new job formation (38,200 jobs during the past 12 months) or that the number of unemployed jobseekers has fallen from 197,000 in January 2011 to 95,000 today, down 26.6 percent in just the last 12 months alone. By contrast, those seeking to temper enthusiasm will quickly point out that Nevada’s unemployment rate is well above the national average (5.9 percent) and remains among the highest in the nation, or that Nevada’s labor force continues to shrink, with an additional 6,000 workers exiting the labor force during the past 12 months.
Reasonable minds can differ, and often do, as it relates to the health of our economy and what all of the statistics mean. That said, for working men and women throughout the state, there is one measure that likely means a great deal more than the others: the layoff rate.
In September 2013, 13,560 initial unemployment claims were filed in the state of Nevada. That figure translates into roughly 1.1 percent of the 1.2 million people currently employed statewide. Not only is the layoff rate roughly one-third of what it was during the depths of the recession, it is significantly lower than the average reported for the past 5 years (1.6 percent), the past 10 years (1.5 percent) or the past 20 years (1.4 percent). In fact, the current rate is almost uncomfortably close to the 0.9 percent reported during the economy’s 2006 peak, a time when Nevada was creating 65,000 jobs annually and boasting an unemployment rate that hovered around 4.5 percent.
The bottom line is this: Nevada businesses are laying off workers at historically low levels. As a result, Nevada workers’ job security is very strong and continues to trend in a favorable direction.
Currently, Nevada has more than 95,000 people actively looking for work, while many businesses, from construction to healthcare, are having a difficult time finding quality candidates to fill open positions. This is the new reality of our complex economy, where statistics like the unemployment rate tell only half the story and often obscure the true nature of market conditions. In fact, our labor market is much stronger than our 7.3 percent unemployment rate might otherwise suggest.
Much has been written, positive and negative, about Tesla's decision to build its lithium ion battery gigafactory in Nevada and the incentive package approved by Governor Sandoval and the Nevada State Legislature to “lure” the company here. Respecting that reasonable minds can differ as to the long-term implications Tesla may have on the state, the bottom line is that Tesla will pay almost no state taxes. This is about the same amount Nevada would have collected had Tesla decided to build its factory in Arizona, New Mexico or Texas.
Notably, Tesla will also receive nearly $200 million in transferable tax credits, which is the functional equivalent of a cash payment from Nevada taxpayers. However, the Tesla legislation concurrently closed existing tax loopholes and reduced less economically beneficial tax incentive programs, making the deal essentially tax neutral for the state's taxpayers. Tesla's contractors, vendors and suppliers will pay all state and local taxes, many generating significantly more than they would have otherwise because of the increased demand for their labor, goods or services. Nevada also gets 6,500 new direct jobs, likely twice that many when the ripple effects are considered.
Perhaps more important than the direct jobs or the tax implications is that Tesla's decision to invest upwards of $3.5 billion in Nevada instantly changes the dialog surrounding what the state “is” from an economic development perspective. High taxes may keep a company from locating into a state or even prompt it to leave, but low taxes alone are far from a determinative factor for site location. Proximity to markets and suppliers, regional accessibility, infrastructure, labor force depth, facility availability and operating cost, quality of life and the regulatory environment are all critical considerations underlying a company's actual ability to do business. Tesla chose Nevada because the state provided the best opportunity for the company to maximize its return on investment; in doing so, it opened eyes and doors for those who might follow.
If Tesla is willing to build what will likely be the most advanced battery technology factory on the planet in Nevada, is it that farfetched that other companies will follow? What about companies that will provide equipment, parts, materials or services to Tesla? Would they not want to be closer to the five million square foot mothership? I think so.
Does Tesla's decision to invest make the prospects of unmanned aerial vehicle research, development and manufacturing in Nevada a bit more plausible? Nevada already has arguably the best base locations and testing sites in the nation; and, last June, the Federal Aviation Administration cleared Nevada to begin testing the ScanEagle drone at the Desert Rock Airport in Mercury, 65 miles northwest of Las Vegas. I think so.
Does Tesla's status as an automotive innovator capture the attention of others who operate on the cutting edge? Does the Tesla deal bring closer similar investments in industries as far-flung as hydroponics whose technology can grow fruits and vegetables with one-tenth the water of traditional farming and who have recently been considering Nevada for significant investments? I think so.
Yes, Tesla got a good deal from the state of Nevada. Yes, economic development requires a certain degree of optimism that companies, like Tesla, will be able to deliver on their promise. Yes, there will be bumps along the way. All of this having been said, what Nevada has given up may very well pale in comparison to what the state will get in return, particularly if you look beyond Tesla.
On May 28, 2014, the Federal Reserve Bank of Philadelphia released its April leading economic indexes for the 50 states. At 4.4 percent, Nevada ranked second in the nation in terms of expected growth over the next six months, behind only Rhode Island.
Also on May 28, 2014, the United States Department of Labor, Bureau of Labor Statistics released its Regional and State Employment and Unemployment Summary for the month of April 2014. That report stated:
The largest over-the-year percentage increase [in employment] occurred in North Dakota (+5.2 percent), followed by Nevada (+3.8 percent) and Florida (+3.3 percent).
In April, Illinois and Nevada had the largest over-the-month unemployment rate declines (-0.5 percentage point each).
On May 27, 2014, the Federal Housing Finance Agency (FHFA) released its Housing Price Index for the first quarter of 2014. The FHFA concluded:
The seasonally adjusted, purchase-only HPI rose in 42 states and the District of Columbia during the first quarter of 2014 (up from 38 states during the fourth quarter of 2013). The top annual appreciation was in: 1) Nevada, 2) District of Columbia, 3) California, 4) Arizona, and 5) Florida.
On May 8, 2014, The Guardian magazine released its first Guardian Cities global brand survey, which placed Las Vegas as the 9th most powerful city brand on the planet. Earlier this year the Las Vegas Convention and Visitors Authority (LVCVA) released its report on visitor volume in 2013, concluding:
Despite one fewer day last year due to 2012 being a leap year and less room inventory for the majority of the year, visitor volume was just 58,802 visitors shy of setting a record in 2013. Las Vegas hosted 39.67 million annual visitors last year, the second highest visitation total ever.
On May 28, 2014 the LVCVA reported visitor volume was up 4.8 percent during the first four months of 2014, suggesting that the "second highest visitation total ever" in 2013 will very likely be followed by the "highest visitation total ever" in 2014.
On May 1, 2014, the UNLV Center for Business and Economic Research (CBER) at the Lee Business School issued the results of its Nevada Business Confidence Index for the second quarter of 2014. CBER Analyst Ryan T. Kennelly reported:
Southern Nevada businesses' expectations increased for the second straight quarter and are at an all-time high.
Finally, on March 25, 2014, the United States Department of Commerce, Bureau of Economic Analysis released its State Personal Income Summary for 2013. That release noted:
Nevada's 4.3 percent earnings growth in 2013 exceeded the national average for the first time since the recession ended in 2009.
I rest my case.
In March 2014, Las Vegas welcomed 3.7 million visitors. Up 4.3 percent from the same month of the prior year, March's visitor count was the highest ever recorded for a single month. Arguably more important is the fact that visitor volume for the past 12 months was 40.2 million, the highest annual count in southern Nevada's history.
The leisure and hospitality industry employs 273,000 workers in Nevada, roughly 1 in every 3. The industry contributes a similar share of wage and salary payments and combined economic output. The industry bears a disproportionate share of state and local taxes, allowing Nevada to be one of only three states in the nation without a corporate or personal income tax. Important efforts toward economic diversification notwithstanding, southern Nevada has benefited, and continues to benefit from being hyper-focused on being the world's greatest destination city.
Las Vegas has compelling competitive advantages, including 150,000 hotel rooms and the nation's 10th busiest airport. That said, with 40 million annual visitors, Las Vegas has had to become all things to all people, which is clearly reflected in our changing visitor profile.
Respecting that convention volumes remain well below pre-recession levels, convention attendance was up 20.5 percent in March. Conventions and tradeshows like CONEXPO-CON/AGG; MAGIC International and CES are posting record attendance levels, helping to push occupancy rates back above 90 percent and room rates to levels not seen since 2008.
Notably, 15 percent of visitors report that they are coming to Las Vegas for the first time, the lowest "first trip" level reported during the past five years. This reflects an uptick in repeat visitation, as the typical traveler now reports 6.4 trips to Vegas during the past five years. Although only 15 percent of visitors report that the primary purpose of their visit was "to gamble", 71 percent of them placed a bet during their trip.
The average visitor was 45.8 years old, a demographic factor that has been skewing younger in recent years. Notably, however, nearly 80 percent of visitors were married, 50 percent reported incomes of $70,000 or more, and they tended to be more highly educated than the population at large.
One in four visitors was from a foreign country, the highest level ever and a notable success for Las Vegas Convention and Visitors Authority, which has been targeting lucrative international markets. One in seven travelers visits nearby places, such as the Grand Canyon, Hoover Dam or Lake Mead. About two percent will play golf and a slightly higher share will visit a spa.
While 97 percent of visitors decided where to stay before they arrived, 72 decided what show they would see and 60 percent decided where to gamble after they arrived in Las Vegas. In fact, the typical visitor traveler now visits nearly six casino-hotels per trip, suggesting Las Vegas' critical mass is also an important competitive advantage.
You would be hard pressed to find another destination market in the country reporting similar quantity and diversity.
Respecting Las Vegas' remarkable staying power, one visitor statistic remains a concern. In 2013, 89 percent of visitors were "very satisfied" with their current trip to Las Vegas. This was the lowest level reported during the past five years and five points below the 94 percent reported in 2012. We have 40 million reasons to ensure that each visitor's experience exceeds expectations, and we would be well served to make certain the decisions we make today will keep them coming back tomorrow.
According to the Federal Housing Finance Agency, the state of Nevada is once again the fastest-appreciating housing market in the United States. During the past 12 months, Nevada reported price increases of 24.3 percent, more than three times the national average and nearly five percentage points higher than the next closest state (California, 19.5 percent). The Las Vegas metropolitan area also ranked 5th nationally among 283 major metropolitan areas, with an annual appreciation rate of 24.7 percent, slightly higher than the statewide average.
The result of the recent price increases has been a 50-percent reduction in the number of homes classified as “underwater” (i.e., that are worth less than the mortgage on the property), a notable increase in residential construction activity, and nearly $30 billion in recovered home equity (or reduced negative equity) for residential homeowners.
To be clear, 20-percent-plus housing price appreciation rates are neither healthy nor sustainable. That said, residential prices today are better aligned with household incomes than they were when housing prices reached their peak of $290,000 (October 2006) or when they bottomed out at roughly $100,000 (January 2012). At present, the ratio of existing median home prices to median household income is roughly 3.3:1, substantially lower than the 5.5:1 reported in 2006 and very much in line with the current national average ratio of 3.6:1.
Southern Nevada’s median existing home price in January 2014 was roughly $158,000 on 3,000 closings. Both the pace of sales and sales prices have shown some signs of slowing during the past couple of months. This settling is to be expected after the strong gains reported during the past year and in light of recent increases in mortgage interest rates. Notably, a total of 47,200 homes closed during the past 12 months. While this figure was down approximately 8.4 percent compared to the prior year, total prices and values per square foot increased by 21.9 percent and 17.5 percent, respectively.
Additionally, many sellers who have been sitting on the sidelines have also reentered the market. The number of homes listed by southern Nevada REALTORS® is up more than 96 percent from where it was a year ago, pushing the effective resale inventory from 1.6 months a year ago to a more balanced 3.4 months.
Higher prices have also breathed new life into southern Nevada homebuilders. New home closings totaled nearly 7,000 units during the past 12 months, up 22.5 percent year over year. Median prices during the same period increased from $220,000 per unit to $305,000, or by 38.5 percent, even though pricing per square foot increased by only 8.3 percent, or from $116 to $125, during the same period. What this means is that home builders are constructing larger homes and selling them for more, a trend nonexistent during the past decade. Permitting activity suggest that nearly 9,000 residential units will be added in 2014. Again, current levels are much more in line with where the market should be in terms of new construction as compared to the market’s peak of 39,000 units (2006) or its trough of 3,800 (2012).
Housing market stability is critical to our community’s economic health. Not only does homeownership represent the single most important wealth-building vehicle for the middle class, but the preservation of existing neighborhoods and the development of new ones are at the core of our quality of life. A recovery in the housing market has been a long time coming and should be embraced, respecting that stability and preservation, and not nation-leading price appreciation rates, should be our focus from this point forward.
The best sign of our economy’s resurgence has been the return of the consumer. Nationally, consumer confidence stands at 78.1, up nearly 15 percent from levels reported just one year ago and three times the dismal 25.3 reported in February 2009. Improved consumer sentiment has translated into increased consumer spending. Nationally, retail and food service sales were up 3.7 percent in 2013. They now stand at $5.1 trillion, the highest level ever reported. The National Retail Federation® is predicting that traditional sales will increase by 4.1 percent in 2014, with online sales growth projected to expand by between 9 and 12 percent this year.
Local retail spending has reported a similar trend, with taxable sales up 4.8 percent in southern Nevada during 2013. Leading the way was motor vehicle and parts dealers, posting an 11.8-percent increase year over year. Polk®, the global leader in automotive industry research, reports the average age of light vehicles on the road at 11.4 years, the highest rate since that statistic began being reported in 2002 when the average age stood at 9.6 years. A strong sign for continued strength in the auto sector, Polk expects an average growth rate of 7.1 percent for newer vehicles (i.e., 0 to 5 years) and a decline in middle age vehicles (i.e., 6 to 11 years) through 2018.
A close second in terms of retail spending growth is building materials and garden equipment sales. Up 10.6 percent to $1.13 billion in 2013, the building sector has benefited from an increase in both residential and commercial construction activity. Residential home permitting rose 11.6 percent during the past 12 months, with the 8,500 units permitted outpacing the 7,100 new home closings. Perhaps even more notable is permitted commercial construction value, which increased from $194 million to $482 million during the past 12 months, or by 148 percent. Remarkably, construction-related employment ranked first in terms of percentage growth, reporting a 9.2 percent uptick in 2013.
Arguably the most important sector in terms of taxable retail spending is food service and drinking places, essentially restaurants and bars. At $8.9 billion annually, the sector accounts for more than one in every four taxable retail dollar spent. Restaurant and bar spending grew by a below average 4.3 percent during 2013; however, eating and drinking places continued to post strong gains in the visitor sector. Eating and drinking in hotel casinos totaled $4.6 billion in 2013, with beverage sales reporting a higher growth rate than in any other department. Today, there are nearly 36,000 food department workers and 9,600 beverage department workers, roughly one in every three people employed in Clark County’s hotels, casinos and resorts.
When it comes to forecasting where the economy will be one year from now, three economists can generally agree if two of them are dead. Consumers, by contrast, are a near perfect predictor of where the economy is heading, for better or worse. The health of our economy is driven by consumers’ willingness to reach into their pockets and spend the money they have earned or saved. More normal spending levels have translated into stronger economic growth rates, record corporate profits and the lowest unemployment rate since October 2008. Assuming these trends continue, 2014 will be another strong year for consumers and those who serve them.
Casino gaming has evolved significantly over the past 20 years. What started with reel slot machines and traditional table games like blackjack, poker and craps has been transformed into a multitude of thematically enticing digital games virtually tailored to the preferences of individual players, as well as innovative table games like Caribbean Stud, Pai Gow Poker and Let it Ride Stud Poker.
Mark Yoseloff has been at the center of this transformation. As the former chairman and chief executive officer of SHFL Entertainment, Inc., he helped transform SHFL from a small, three-product company to a global provider of innovative casino products. The company introduced blackjack and poker shufflers that increase the speed of games, side bets that make table games like blackjack more exciting for players, and new casino games like Caribbean Stud and Ultimate Texas Hold 'em. Late last year, SHFL Entertainment was acquired by Las Vegas-based Bally Technologies, Inc. for approximately $1.3 billion.
Mr. Yoseloff has recently taken his talents to UNLV, where he created the Gaming Innovation Program within the William F. Harrah College of Hotel Administration. The program is open to 20 undergraduate and graduate students and focuses on the development and commercialization of new casino games. I recently had the opportunity to observe as students from the fall session presented their ideas. I signed a confidentiality agreement prohibiting me from disclosing any of the specifics of the students' work; however, I am safe to say that it was nothing short of extraordinary. The thoughtfulness and creativity of these students reflected their experiences, their diversity and a willingness to collaborate. Mr. Yoseloff provided the simple framework: (1) make it different; and (2) maintain the necessary house advantage; the students did the rest.
What the students were able to achieve was compelling, as was the generosity exhibited by Mr. Yoseloff, who made the Gaming Innovation Program possible through a $250,000 gift from the Yoseloff Family Foundation. That said, it is the broader implications of this program that are worthy of additional attention. As a result of the work of these 20 students and their instructor, 12 patents have or are in the process of being filed with the United States Patent and Trademark Office. This not only provides real-world opportunities for the student-inventors, but it is precisely the blend of public university research and private sector application that is critical to Nevada's longer-run economic viability.
Turning university research into private sector jobs through the commercialization of innovative ideas and scientific discoveries has been a top priority for the university system and state economic development officers, as well as Governor Brian Sandoval. The Gaming Innovation Program is a shining example of what is possible, and hopefully, what is to come. As Nevada continues to struggle with elevated unemployment rates and state budget shortfalls, empowering students at all levels to develop ideas that leverage not only their abilities but also our community's core competencies should be at the center of our policy and budgeting discussions.
There are a great many things to give thanks for this holiday season. After the health and well-being of friends and family, atop my list is that it is no longer 2010. Looking back at where we were just a few years ago provides not only a sobering reminder of how fragile our economy truly is, but also a compelling perspective on just how far we have come.
At the national level, gross domestic product, personal incomes, retail sales, corporate profits and the S&P 500 are all at record levels. The U.S. economy lost 8.7 million jobs between December 2007 and September 2010. Since that point, 7.4 million jobs have been added back to the economy. The nation's unemployment rate, which reached 10.0 percent in October 2009, now stands at 7.0 percent. Industrial production and capacity, which hit decade lows in 2009, are now at or above prerecession levels. Finally, after falling 23 percent between 2007 and 2010, national housing prices have risen 13 percent in just the past 12 months and homebuilders are getting back to work.
Closer to home, the numbers are even more remarkable. Nearly every southern Nevada economic indicator trended positive in 2013, in sharp contrast to 2010, when every indicator was moving sharply in the opposite direction.
Southern Nevada shed nearly 15 percent of its workforce between December 2007 and February 2011, 2.3 times the loss rate reported nationally. During the past 12 months, southern Nevada reported an employment growth rate of 2.1 percent, outpacing national averages by a healthy margin. The local unemployment rate, which peaked at a staggering 14.6 percent in July 2010, has fallen to 9.4 percent as nearly 54,000 jobs have been added back to the economy since it bottomed out.
Housing prices, which reported declines for four consecutive years, posted gains in excess of 26 percent during the past 12 months. In response to population growth rates three times the national average, residential permitting is up 7.1 percent, and sales per active subdivision are up more than 17.5 percent.
Even with more hotel rooms on the market today, hotel occupancy rates that were barely above 80 percent in 2010 averaged 84 percent during the past 12 months and approached 88 percent in October. Visitor volumes are at near-record highs, pushing average daily room rates up 2.1 percent year over year and up 16 percent since 2010. Visitors are also spending more than ever on retail, restaurants, nightclubs and shows.
Taxable retail spending in Clark County is up 4.9 percent during the past 12 months. By way of comparison, in December 2010 taxable retail sales had reported 35 consecutive months of year-over-year declines. Key spending categories such as motor vehicle sales (+12.0 percent), building materials and equipment (+7.3 percent), durable goods (+6.1 percent), and electronics and appliances (+5.8 percent) have all reported above average gains this year.
Remnants of the Great Recession remain in every corner of our economy. There are those who cannot wait for every remaining fragment to be extricated from both our economic landscape and our collective memory. I would respectfully submit that we should be cautious not to discard them too quickly, as they serve as a valuable reminder of both our struggle and our triumph.
Las Vegas' tourism economy is changing rapidly. In 1990, casino gaming accounted for 58 percent of hotel-casino revenue along the Las Vegas Strip, a number which fell to 46 percent a decade later. Last year, casino gaming accounted for only 36 percent of Strip operators' gross revenue. Today, there are 20,000 fewer slot machines on Clark County casino floors than there were in 2001, even with 25,000 more hotel rooms.
While casino gaming remains a vital revenue center and rooms, food, beverage and retail are contributing more than ever before, it is next-generation nightclubs, bars and ultra-lounges that have emerged to become the second most profitable square footage along the Las Vegas Strip.
According to the 2013 Top 100 list developed by Nightclub & Bar and Technomic, Inc., Las Vegas is home to seven of the top ten nightclubs in the United States, including four of the nation's top five clubs. Sharing the top spot were XS Nightclub (Encore) and Marquee LV (Cosmopolitan), both reporting gross revenue of between $80 and $90 million per year.
Not included in the 2013 rankings was MGM's Hakkasan, which opened in April of this year. With a facility construction price tag north of $100 mi l l ion, the 80,000-square-foot, multi-level club and restaurant is expected by most observers to set a new high water mark for the industry. Perhaps more impressive than the facility's construction cost is the $70 million set aside for superstar DJs. Tiesto, Calvin Harris and Steve Aoki may not be household names to most; but, to Grey Goose-guzzling Millennials with a puzzling quantity of disposable income, these guys are like the Pied Piper of Hamelin. And they had better be. Calvin Harris topped Forbes 2013 list of the world's top-paid DJs at $46 million per year.
Las Vegas visitors are beginning to skew younger, and the reality is that you simply don't see many 30-year-olds playing video poker machines on casino floors. Some believe this is a recipe for disaster for Las Vegas; others believe it is only the beginning of Las Vegas' next evolution.
Las Vegas has always known how to throw a party, and club developers and operators like Angel Management Group and Light Group are setting a whole new standard. Add to these major events like the Electric Daisy Carnival and a round-the-clock club atmosphere made possible by the emergence of poolside day clubs-which can easily generate $1 million in gross revenue a day on summer weekends-and you have a billion-dollar industry that is now driving a healthy share of demand for Las Vegas room nights.
Las Vegas' greatest strength has always been the destination's ability to constantly reinvent itself. Nightclubs, dayclubs and ultra-lounges are merely the most recent in a long line of entertainment innovations that have helped Las Vegas draw nearly 40 million visitors per year. While its economics may appear confounding on the surface, their results and relative impact are undeniable. These younger, sophisticated partygoers are opening new doors and new opportunities for the Las Vegas resort industry; they also represent a source of longer-run demand when they reach into their 40s, 50s, 60s and beyond. Their affinity for Las Vegas as a vacation destination may start with high-end vodka and pricey table rentals within our nightclubs, but it is the broader experience that will keep them coming back.
To find the areas in the United States with the greatest economic potential, you need look no further than a list of the nation's Tier 1 research universities. These institutions have annual research budgets ranging from $500 million to well over $1.0 billion, and they have become remarkably adept at spinning off commercial ventures in science, technology, engineering and health care.
Tier 1 universities are creating patents and Ph.D.s, and in doing so, laying the foundation for future economic development. Notably, a majority of university research funds are sourced to federal grants and other national research programs. These funds generate an inflow of research capital, building labs and supporting faculty and support staff. Perhaps more importantly, they also operate as seed capital for new businesses designed specifically to bring innovations to market; they have created an incentive for business expansion in places like Austin, Salt Lake City, Phoenix, San Jose, San Francisco, Boston, Raleigh and Ann Arbor.
No one better understands UNLV's importance in our community's economic future than university president Neal Smatresk, who is focused on making UNLV a top-tier research university. Las Vegas is the largest metropolitan area in the country without such an institution; and, with an annual research budget of only $30 million, the state's flagship university is well behind the curve. California has multiple universities boasting annual research budgets well in excess of $500 million. University of Arizona ($560 million), Arizona State University ($280 million), University of Utah ($331 million), and Utah State University ($143 million) all report significantly higher research budgets.
There are those who believe that such a goal is overly ambitious, suggesting UNLV should focus solely on preparing undergraduates to join the workforce. They contend that an increased emphasis on research will detract from this core mission, making the state's workforce less competitive and ultimately leading to higher rates of unemployment. In fact, the exact opposite is more likely the case. The innovation sourced to research and development-whether on or of f university campuses-is what is driving economic growth globally. Absent this investment and the innovation stemming from it, the employment prospects for the masses will almost assuredly be reduced.
There are those who argue that the cost is simply too high and that university professors should spend more time teaching and less time researching. Not only does this argument fail, based on the merits of the research outlined above, but such a position completely overlooks the leveraging mechanics of research funding leading to more faculty, not less. Not surprisingly, universities attracting the best researchers tend to get more research grants. This translates into hundreds of millions of dollars flowing into a university. By contrast, the $75 million cut from UNLV's budget over the past five years will likely cost the state 10 times that amount in research funding. Concurrently, class sizes have gotten bigger, fewer sections are being offered and innovative programs have been suspended. At Tier 2 universities the average number of students per full-time faculty is roughly 22 to 1; notably, at Tier 2 UNLV this ratio is approximately 32 to 1. Among Tier 1 universities, this ratio is roughly 14 to 1.
President Smatresk's focus on making UNLV a top-tier research university is not only appropriate, it is essential. Absent the development of new programs borne through research, exploration and innovation, the university will continue to lose hundreds of millions of dollars in grant opportunities and the community stands to lose billions in economic potential.
Like many communities around the world, southern Nevada aspires to be a technology hub. To illustrate our progress toward this lofty goal, observers commonly point to Zappos CEO Tony Hsieh's $350-million investment in Downtown Las Vegas-ostensibly designed to increase "collisions" among creative thinkers-and Switch Communications CEO, founder and chairman Rob Roy's relentless focus on building the world's most efficient, high-density data center.
Respecting that Mr. Hsieh's influence on Downtown has been nothing short of transformative and Mr. Roy's vision arguably led to Nevada's most important start-up in a generation, such a narrow focus completely misses the economics underlying our community's metamorphosis from analog to digital.
Even the idea that there is a "technology industry" is ill-conceived. Switch Communications is to technology today what the railroad was to technology in the early 1800's, providing the infrastructure for companies around the world to do things that were inconceivable just a decade ago. Zappos-perhaps more appropriately its parent company Amazon-provides the most efficient link between retailers and consumers in the history of mankind. Far from a novel economic concept, Amazon is equal parts port and bazaar, giving anyone in reach of a computer or smartphone instant access to the Port of Louisiana and the Mall of America.
Technology is not an industry; it is the common denominator underlying the future of all industries.
Our state's most important sectors, including gaming, mining, banking, manufacturing, construction and development, energy, transportation, and health care, are all replete with examples of this transformation.
While we would all love Las Vegas to join the ranks of the world's great innovation clusters like those in Silicon Valley, Boston, Tech City London, Israel and Bangalore, India, our best opportunity to exploit technological innovation is to facilitate its use and development within our base economy. A case in point is Ultimate Poker, the first legal online gaming site in the United States, made possible by technological
innovations developed by a local family that entered the bricks-and-mortar gaming business in 1976 at the corner of Interstate 15 and Sahara Avenue. While unemployment remains somewhat elevated, U.S. worker productivity is at its highest level in history, and so are corporate profits. Stated differently, those people who are working are producing more than ever before, and corporations that have used technology to lower costs are bringing those savings to the bottom line. This trend is expected to continue, with an ever-growing divide between the people who are building robots and the people who are being replaced by them.
The expectation is that over time, human workers will have the capacity and ability to focus on higher-level tasks, as computers are used more and more to efficiently perform mundane jobs. The catch, of course, is that the pool of available workers needs the ability to contribute at this higher level.
Southern Nevada is already becoming a technology hub. That said, the speed and success of this transition will come as much from our schools and universities as from the relocation of software developers from San Jose, Boston or Beijing. It will come as much from the businesses that have invested in our economy during the past fifty years as from those willing to invest during the next five. It will come because southern Nevada's greatest economic strengths are resiliency and adaptation, and our collective focus has shifted from surviving the recession to building for our future.
In February 2012, Governor Brian Sandoval called for Nevada to create 50,000 jobs by 2014. This was a particularly bold move by the Governor considering that when he took office, the state had shed nearly 175,000 jobs from its May 2008 peak, had reported job losses for 35 consecutive months, and was still reeling in the aftermath of the Great Recession.
Remarkably, while Governor Jim Gibbons suffered through negative growth for the last three years of his term, Governor Sandoval has benefited from positive annual employment growth rates every month since taking office in January 2011. Nevada has created nearly 39,000 jobs since Mr. Sandoval took office; and, with 18 months of reporting remaining through 2014, he should easily reach his goal of creating 50,000 new positions.
There are those who believe the Governor has just been lucky-right place, right time; others contend he should be given full credit for every new job that has been created on his watch. As usual, reality lies somewhere between these two extremes.
Those who wish to downplay any credit Mr. Sandoval might take for Nevada's economic course correction will undoubtedly point to the fact that the jobs trend shifted from positive to negative before the Governor had the ability to effect any meaningful policy changes and took place a full year before his economic development road
map was even released. They will also surely point to the 330,000 jobs created under the admittedly longer Miller and Guinn administrations, suggesting that Governor Sandoval will need to do much more to equal the economic accomplishments of his predecessors.
I would respectfully submit that such comparisons are misplaced , as are countless other attempts to use our state's historical growth as a measuring stick for current economic progress. Irrespective of whether Nevada reaches the Governor's 50,000-job goal by 2014, Mr. Sandoval has already placed himself among the most progressive economic development governors in Nevada's history.
This is evidenced by any number of factors, including the creation of the Governor's Office of Economic Development, which has: strategically aligned the state's economic development efforts; reduced needless competition among regional agencies; increased resources available to help relocating and expanding businesses; and launched the state's first economic development data repository. Mr. Sandoval has also expanded the state's reach with trade missions to China, South Korea and Mexico. He has called for Nevada's colleges and universities to refocus on emerging technologies and commercialization, and they have responded with new programs in areas such as cyber security and unmanned aerial vehicle research and development. The Governor has been a tireless advocate for the state's tourism industry, forwarding its causes both in terms of online gaming and international travel. At the same time, Nevada has also seen growth in small business activity and the announcement of some of the nation's most significant new projects (e.g., the $1-billion Apple® data center in Reno-Sparks and the $2.0-billion-plus Resorts World project in Las Vegas).
Governor Sandoval cannot take credit for every job that's created, nor should he be assigned the blame if the economy were to suddenly reverse course tomorrow. At the same time, the idea that the state's recent economic improvements are mere serendipity is equally preposterous. The economy transitioned from recession to recovery several months before Mr. Sandoval took office; but, more important than the economic hand the Governor was dealt, is how he's chosen to play it. Thus far, he appears to have been both lucky and good.
Apple® is a registered trademark of Apple Inc. and Nevada State Bank does not claim any ownership or exclusive rights to the use of this trademark.
There has been a lot written about southern Nevada's housing market during the past 30 days. The Wall Street Journal's Nick Timiros recently wrote an article entitled "Foreclosure Squeeze Crimps Las Vegas Real-Estate Market" in which he argues that a state law passed in 2011 has unintentionally created a glut of vacant housing that is outside the reach of would-be homebuyers. The Las Vegas Review-Journal's economic ace, Jennifer Robison, raised concerns that higher interest rates may put a stop to the local housing boom in her thought provoking piece: "Rising interest rates cast shadow over valley's housing market," and North Las Vegas' continued debate relative to the use of eminent domain to acquire underwater houses has provided fodder for the press locally and nationally.
While I am the first in line to raise concerns over strategic squatting, aggressive investing and ill-conceived government policies that are either ineffective or counterproductive, these concerns should not be distorted into the irrational conclusion that recent improvements in the housing market are somehow a bad thing.
Southern Nevada's housing prices are currently rising at or near the fastest clip in the nation. The Federal Housing Finance Agency reports that the Las Vegas Metropolitan Statistical Area has been the nation's sixth-fastest appreciating metropolitan area during the past 12 months, a conclusion consistent with reports issued by Case-Shiller nationally and SalesTraq locally. Southern Nevada's 481,000 single family residential housing units have a combined value of approximately $72.3 billion, suggesting that every one percent increase in home values generates $723 million in new or recovered equity for Nevada homeowners. Home prices are up at least 20 percent year-over-year, which translates into increased local equity of $ 14.5 billion, or just over $ 30,000 per household.
Respecting that these price increases are faster than we would like and are undoubtedly linked to a high incidence of investor purchases, housing supply constraints, and historically low interest rates, they also reflect the reality that southern Nevada was arguably among the most undervalued housing markets in the United States 18 months ago and is currently reporting above-average population growth rates.
Homebuilders are also getting back to work with 151 subdivisions currently active valley-wide. Southern Nevada reported 8,010 residential permits pulled during the past 12 months. This figure is up 35 percent compared to permitting levels reported 12 months ago; however, it is nowhere near the 43,300 annual permitting figure reported when the market peaked in 2006. Today, residential permitting accounts for only 1.7 percent of the local housing stock, and the ratio of new job formation to new home construction is well within the expected range. While rising interest rates are certainly a concern for the industry, 30-year mortgage rates remain well below their 10- and 20-year averages (5.3 percent and 6.4 percent, respectively).
A final element that is commonly overlooked in the housing discussion is the majority of homeowners who have remained current on their mortgages and out of foreclosure, often in the face of great personal sacrifice. Many continued to make payments knowing all too well that they owed more than their homes were worth, and frustrated by relief programs helping everyone but them. All the while, friends and neighbors seemed content to merely walk away from their obligations. There are those who will try to cast these people as the greater fools, but they do so only in an attempt to rationalize behavior that in any other generation would have been disgraceful. These stalwart homeowners are to be commended, as their choices provide not only the economic foundation, but also the moral fiber needed for long-term economic prosperity.
Las Vegas is unique in that roughly 17 percent of the people who put their head in a bed on any given night don't actually live here. This non-resident population share is higher than almost anywhere else in the country, with nearly 40 million visitor trips adding 340,000 people to our full-time equivalent population.
It goes without saying that these visitors contribute significantly to our local economy, supporting hundreds of thousands of jobs, billions in wage and salary payments and more economic activity than any other sector. What is often overlooked, however, is the contribution visitors make to the public services full-time residents rely on every day.
There is almost nothing that a tourist does that isn't subject to tax. For many, the first taxes encountered are on transportation from the airport, with both taxi and rental car charges generating revenue supporting state and local government services. In addition to the 10-percent short-term car rental tax allocated to the state, a special 2.0-percent levy provides critical funding for the Smith Center for the Performing Arts.
Among the largest sources of revenue for state and local governments is sales and use tax, which is currently levied at 8.1 percent on tangible goods sold at retail. Visitors account for an estimated 26 percent of all sales tax receipts, significantly more than their share of the full-time population base. This is due to a number of factors, not the least of which is the structure of Nevada's sales tax itself. It is not by accident, for example, that food purchased for home consumption is exempt, while food purchased at a restaurant is subject to the state's sales tax.
Visitors also bear the burden of the transient hotel lodging tax, which was increased to as much as 13 percent in 2009. Hotel room taxes generate more than $500 million annually, funding public schools, transportation improvements, state and local government services and the Las Vegas Convention and Visitors Authority (LVCVA). Originally levied specifically to promote tourism, today the LVCVA receives only 32 percent of room tax revenue, while nearly 40 percent benefits education programs.
Visitors who see a show while in town also pay the live entertainment tax, a byzantine levy of between 5 percent and 10 percent on admission and food, beverage and merchandise, which varies based on the size and location of the venue. Generating about $140 million annually for the state's general fund, this tax is structured specifically to avoid taxing entertainment commonly frequented by locals (e.g., movies or college athletics) while being particularly onerous on tourist-centric entertainment. Consider, for example, that a drink purchased at a typical Cirque du Soleil show bears the state's liquor tax, sales tax and live entertainment tax for a combined tax rate of approximately 20 percent.
Then, of course, there are the gaming taxes. Nevada currently imposes 13 separate taxes on gaming and related activities, the most significant of which is a gross gaming revenue fee of up to 6.75 percent. This levy alone generated more than $650 million for the state during fiscal year 2012, the vast majority of which was attributable to spending by southern Nevada's 40 million visitors.
Visitors account for more than $1.2 billion in tax payments annually, allowing residents and most non-gaming businesses to have among the lowest tax burdens in the United States. On the other side of the ledger, visitors do not have their children in our schools; they are not enrolled in our state health and welfare programs; they are neither our homeless nor our unemployed. They come to escape, to play, to spectate, to relax, to meet, to celebrate or just to have a great time. Tourists and conventioneers have built our community, and continue to support it with every dollar that they spend. They are deserving, not only of our hospitality, but also our gratitude.
Americans are going back to work. What was a jobless or even a job-loss recovery has transformed into an economy that is creating nearly 2.1 million jobs annually.
During the past 12 months, the nation's employment base grew by 1.6 percent. Nevada bettered that average, creating nearly 25,000 jobs and reporting a growth rate of 2.2 percent during the year. Of those new jobs, 20,000 were sourced to Clark County, where the annual growth rate was an even higher 2.4 percent. The bottom line: Nevada is now outpacing the nation in terms of job growth, and southern Nevada is accounting for 8 in 10 new jobs created statewide.
Perhaps more important than the sheer number of jobs created in the Las Vegas area is where those jobs are being created. Nearly every major industrial sector reported positive growth over the past 12 months. The two that did not, mining and information, were flat as opposed to negative. They are also the two smallest sectors of southern Nevada's economy, totaling only 1.2 percent of the workforce, combined.
Notably, it is the business and professional services sector that has led the way in terms of job growth, accounting for nearly 1 in every 4 jobs created and posting an annualized growth rate of 4.3 percent. Leisure and hospitality contributed an additional 4,000 new positions, but posted a lower-than-average annual growth rate at 1.5 percent. The hard-hit construction sector added a more modest 1,700 positions, but reported the highest year-over-year growth rate of any sector of the local economy at 4.8 percent. Our economy and our labor force gained some much-needed diversity over the past 12 months, with key sectors demonstrating marked improvement.
A healthy share of Nevada's economic growth is sourced to small businesses. At the end of 2012, the state had approximately 72,000 businesses, a figure 1,600 higher than reported at the end of 2011. Available data tend to suggest that roughly 43 percent of new business formation is attributable to businesses with fewer than five employees, and nearly 88 percent is attributable to businesses with 50 or fewer employees. In a 2010 speech addressing the nation's need to restore the flow of credit to small businesses, Federal Reserve Chairman Ben Bernanke noted that small businesses employ half of all Americans and account for 60 percent of gross job creation. While these statistics need to be viewed cautiously, southern Nevada's ability to attract, retain and create entrepreneurs is essential to our long-run economic viability.
This need notwithstanding, there are a number of ominous clouds looming over businesses, large and small. Primary among them are the impact of recent tax hikes at the federal level, a state business tax increase slated for the November 2014 ballot and costly mandates imposed by the Affordable Care Act (sometimes referred to as "Obamacare"). The impacts of these and other dynamics are uncertain, and businesses are reacting by hiring more part-time workers and exercising caution relative to expansion-based investment.
Concerned but not dissuaded, Nevada businesses are rightly reacting to what is while preparing for what may be. This is leading to increased profits for restaurants, retailers, banks and builders, who, in turn, are putting people back to work by the thousands. During our darkest hour, southern Nevada lost nearly 100,000 jobs in a single year. From that point, we have added back more than 34,000 jobs, our employment growth rate is now exceeding national averages, and nearly every sector of the state's economy is contributing to the recovery. If there is a better sign of our economy's resiliency, I am unaware of it.
Las Vegas as we know it today began with an auction of 1,200 lots on May 15, 1905. From the very beginning, there were those who expected Las Vegas to fail. In documenting Las Vegas' first 20 years, LA Times reporter Harry Carr noted that southern Nevada's boom towns had "expired with a sob and a groan...with desert winds blowing sorrowfully through empty hotels and deserted city halls." Carr was critical of Las Vegas, but noted that the real estate office-which "had been a good place for afternoon naps"- was suddenly abuzz with activity due to Congress' passing of the Boulder Dam bill.
The Boulder Dam (now Hoover Dam) commenced construction in 1931. In that same year, The Ogden Standard Examiner ran an article entitled "Boom Town Fails to Boom," declaring, "For the boom that has been rumbling faintly in this little city of 5,000 ever since the Boulder Dam project was assured, seems today to be only a disheartening dud." Nevada also legalized gambling in 1931, and not long after, the The New York Times questioned the move, remarking that "both Reno and Las Vegas are flops as Monte Carlos." Such prognostications would quickly be proven wrong as Las Vegas would rapidly become one of the fastest-growing communities in the United States.
By 1949, southern Nevada's population had surged to 26,000 and the tourism economy was generating $16 million annually. Calling our visitor-based economy untrustworthy, a January 1949 Long Beach Examiner editorial concluded, "The fabulous hotels and gambling halls operating 24 hours a day are finding that the boom is over."
This perpetual underestimation surfaces over and over and over again. Newsweek ran an article in 1950 called "Las Vegas Twilight?" and five years later Life magazine would run a cover story under the headline "Las Vegas-Is Boom Overextended?" The 1950s would also bring media concerns that atom bomb testing would be the end of southern Nevada's tourist trade. During recessions in the 1970s, 1980s and 1990s, numerous media accounts suggested the combination of economic uncertainty and gaming proliferation into Atlantic City and Midwest riverboats meant Las Vegas was "running out of luck."
The Mirage (1989) was too ambitious, the MGM Grand (1993) too big, and the Bellagio (1998) too luxurious for Las Vegas visitors.
During the most recent downturn, Time Magazine ran a 2009 cover story entitled "Less Vegas: The Casino Town Bets on a Comeback." Author Joel Stein's piece felt almost like a chronicling of the apocalypse as he observed, "Just as Las Vegas was the epicenter of the extravagant consumption of the past 20 years, now it's the deepest crater of the recession over the last year." While Stein's article was notably more balanced than those of his predecessors, he too could not resist the opportunity to predict Las Vegas' impending demise, calling it "the world's greatest ghost town in waiting."
Today, visitation is at an all-time high. Population, housing prices and incomes all are rising while unemployment is falling. There is roughly $6 billion of planned, proposed or under-construction projects in the resort corridor. I challenge you to find another community in the United States reporting a similar level of core industry investment. Our economy is far from perfect, but it is nothing if not resilient. And, to those who would suggest that our best days are behind us, I would simply point to a century of similar prophecies that have accompanied the nation's most prolific economic expansion.
Collegiate sports are big business. If you don't believe that, you need only look at Forbes' ® recent list of America's most valuable college teams. The Texas Longhorns® are currently valued at about $133 million; and, in 2011, they became the first college team in history to generate more than $100 million in total revenue. In basketball, Rick Pitino's Louisville Cardinals® sit atop the list, boasting a value of $36.1 million and an annual profit in excess of $23 million.
There is fairly strong evidence that winning college sports teams help bolster local universities. A recent study released by the National Bureau of Economic Research found a meaningful link between college football success and increases in charitable donations - both athletic and non-athletic - as well as an increase in the number of admissions applications, a decrease in the percentage of students accepted by the university, and a higher rate of in-state enrollment. Impacts were notably greater when the university was in a Bowl Championship Series®
(BCS) athletic conference or when they recorded a notable upset in the prior year.
Okay, fair enough. So, Alabama's Crimson Tide® has a positive impact on Tuscaloosa, and if the Gonzaga University Bulldogs® can carry their hot streak into the NCAA basketball tournament, perhaps a few more people will be willing to spend four years in Spokane, Washington.
But what about the broader impacts to the community?
The economic research on this topic is all over the board, but anyone who was here during the Runnin' Rebels'® national championship run during the 1989 - 90 season, or when Randall Cunningham led the Rebels to their first conference championship in 1984, or when the Rebs' Elbert "Ickey" Woods set the collegiate Division I rushing title just two years later will tell you that there was an energy that permeated every inch of our community.
I live in a world of 1s and 0s. That said, I cannot ignore the anecdotal accounts of cab drivers, hotel operators, retailers and restaurateurs who all say the same thing. When the Rebels win, people seem to be in a better mood, they go out a little bit more, and they spend a little bit more. For a service-based economy like ours, these accounts translate into jobs, wages and business receipts.
According to the ESPN's RPI poll, the UNLV Runnin' Rebels (23 - 8) closed out the regular season as the 22nd best team in the nation. The Thomas & Mack Center has been packed, and it has been loud (hat tip to the Rebellion). Not that they need any more pressure, but our economy can use all the help we can get, so here's hoping the Rebels make a run in the NCAA basketball tournament. I don't think our football team has any risk of getting picked up by a BCS conference in the near future; but, based on that national study, a notable upset will do-let's start with the UNR Wolf Pack (please).
In December, the United States Census Bureau released its 2012 population estimates for all 50 states, the District of Columbia and Puerto Rico. The United States reported an average growth rate of roughly 0.7 percent. Nevada's population growth rate was just over 1.4 percent, two times the national average and the sixth highest rate reported nationwide.
Clearly reflecting that population migration favors economic prosperity, the top five fastest-growing states were North Dakota (+2.2 percent), the District of Columbia (+2.1 percent), Texas (+1.7 percent), Wyoming (+1.6 percent) and Utah (+1.5 percent). It is worth noting, however, that Nevada's net population increase during the period, +38,900, was more than that reported by North Dakota (+14,888), the District of Columbia (+13,303) and Wyoming (+9,056) and roughly on par with that reported by the state of Utah (+40,940).
The fact that Nevada is growing again is a positive sign for our economy. The infusion of both needed talent and income has been an important element in our state's somewhat tepid economic recovery.
Today in southern Nevada, there are more households connected to the electric grid than ever before, we have a record number of students in our public schools and the number of newcomers surrendering out-of-state driver's licenses at local DMVs is well above recession-era lows. Perhaps as important as this resurgence in population growth is that our community is coming together to rethink how we grow.
Southern Nevada recently received a $3.5-million Sustainable Communities Initiative grant from the United States Department of Housing and Urban Development (HUD) to undertake a region-wide planning process. Across the country, a select number of HUD grantees are working to integrate housing, land use, economic development, transportation and infrastructure investments with the goal of building communities that are more collaborative, prosperous, equitable and sustainable.
At a recent kick-off meeting for the local effort-referred to as Southern Nevada Strong-Shelley Poticha, HUD's director of the office of sustainable housing and communities, noted that being awarded the Sustainable Communities Initiative grant was HUD's equivalent of "getting your child into Harvard." Not only does it present a unique opportunity for southern Nevada to rethink how we will grow in the future, but it also increases the region's competitiveness for other federal funding programs, an area where Nevada has perennially ranked at or near the bottom in terms of per capita allocations.
The problems of growth are infinitely better than the problems of contraction. That said, the way we grow will affect almost every aspect of our daily lives, not to mention how competitive we are in attracting new businesses and retaining our best and brightest students. Southern Nevada Strong is a clear indication that our community not only recognizes this need, but is willing to do the work necessary to ensure that we are building for a more prosperous tomorrow.
Often overlooked in the discussion of southern Nevada's economic assets are Nellis Air Force Base and the related facilities at Creech Air Force Base and the Nevada Test and Training Range Complex. Home to the largest civil engineer, logistics readiness, communications and force support squadrons in U.S. Air Combat Command, they employ roughly 15,000 active military, reservists and civil personnel, generating annual payroll upwards of $1.2 billion. By way of comparison, the largest hotel-casino on the Las Vegas Strip employs about 8,200 workers, Clark County general government employs roughly 8,100 workers, and McCarran International Airport employs about 1,700 workers.
What would ultimately become Nellis Air Force was the Army Air Corps Gunnery School established in January of 1941. At the time, fewer than 8,500 people called Las Vegas home, but the remote location made it strategically valuable, and the fact that 90 percent of the area to the north was unpopulated and could be acquired for $1 per acre made it ideal for air combat training and gunnery operations. By 1945, the base would grow to nearly 11,000 officers and enlisted people, quickly becoming the largest employer in the region. In 1950, the base was renamed in honor of 1st Lt. William Harrell Nellis, a young man from southern Nevada who was killed in action over Luxembourg in December of 1944. Few could imagine then what Nellis Air Force Base would become.
Today, as part of the U.S. Air Force Warfare Center, units at Nellis Air Force Base provide training for composite strike forces that include every type of aircraft in the U.S. Air Force inventory, along with air and ground units of the Army, Navy, Marines and air units from allied nations. Nellis is also charged with operational testing and evaluation, as well as tactics development. It is the home of both the U.S. Air Force Air Demonstration Squadron "Thunderbirds" and U.S. Air Force Weapons School. Forty-five miles northwest of Nellis Air Force Base is Creech Air Force Base, home to the Predator unmanned aerial vehicle. Creech Air Force Base is now the global hub of U.S. Air Force's remotely piloted aviation mission, not only providing training, but also directing the coordination of combat sorties around the world. Supporting both Nellis and Creech is the Nevada Test and Training Range, the largest contiguous air and ground space available for peacetime military training and operations in the nation. The range occupies 2.9 million acres of land, 5,000 square miles of air space and an additional 7,000 square miles of military operating area, supporting the testing of aircraft and the training that has contributed to our nation's air superiority for the last 50 years.
The men and women of our armed forces are deserving of our unwavering gratitude and respect. Led by Major General Lofgren, the U.S. Air Force Warfare Center, Nellis Air Force Base is not only an exceptional example of U.S. military might, but of a successful partnership between the military and its host community. As we seek to redefine our economy in the wake of the Great Recession, we would be well served not to overlook the impacts of, and competitive advantages created by, these critical community assets.
Nevada has approximately 325,000 residents age 65 or older. Although these older Nevadans account for a below-average share of the state's total population (12 percent in Nevada vs. 13 percent nationally), the segment ranks among its fastest growing. Where Nevada's overall population grew by a nation-leading 35.1 percent between the 2000 Census and 2010 Census, those age 65 and older grew by a staggering 48.2 percent. By way of comparison, the retirement havens of Arizona and Florida reported 65-plus population growth rates of 32.0 percent and 16.1 percent, respectively, during the same period.
There are those who believe that Nevada's influx of older residents is a bad thing. Common concerns include high rates of poverty among the elderly Americans who have failed to sufficiently plan for retirement, the cost of providing healthcare for uninsured and underinsured retirees, and an unwillingness of older residents to invest in education or needed infrastructure. A careful examination of the facts not only suggests these concerns are largely unfounded, but that Nevada's retiree population might very well be among the state's most valuable assets.
An estimated 21 percent of Nevada's residents are living in poverty; this figure is only 12 percent among the state's population age 65 and older. Similarly, while Nevada reports among the nation's highest uninsured populations, Medicare provides significant healthcare benefits to nearly 380,000 Nevada residents, 86 percent of whom are age 65 and older. This makes Nevada seniors among the state's least likely residents to be without access to healthcare.
Finally, it is certainly true that older residents tend to be more fiscally conservative, particularly when it comes to tax increases. What is often overlooked, however, is that older Nevadans are already significant contributors to vital state programs. A combination of smaller households and the reality that older Americans tend to spend a higher share of their incomes, per capita spending for 65-plus households is actually 19.4 percent higher than what is reported by younger households. Older consumers tend to spend significantly more on healthcare, entertainment, eating out and gifts. Additionally, 81 percent of older households are homeowners, considerably higher than the 61 percent reported by younger households. Thus, older households are significant generators of property, sales and gaming taxes - the largest sources of revenue for Nevada's schools, infrastructure and many other government programs.
Retirees are not without their challenges. The cost of long-term care programs, for one, is a growing concern that will continue to stress state and local budgets. That said, today's retirees are both healthier and wealthier than their parents were. Those relocating to the state often come with accumulated wealth and stable retirement incomes. They spend more than they earn, while taking relatively few jobs.
In short, Nevada's retirees should be viewed not only as a social asset but as an economic one. The first of the Baby Boomers turned 65 on January 1, 2011. An estimated 10,000 will do the same every day for the next 19 years. Attracting and retaining retirees will be a key to Nevada's economic vitality during the next two decades; the state would be well served to solidify its pro-retiree positioning.
Twice last week I heard the same comment: Nevada was the first state to go into the recession and will be the last state to come out of the recession. While the impacts of the economic downturn that began in December 2007 were unarguably more intense in Nevada and its residual effects continue to linger, Nevada was not the first state to enter the recession, nor is it still in recession today.
The National Bureau of Economic Research Business Cycle Dating Committee is charged with officially dating US recessions. The Committee determined that the last recession began in December 2007 and ended in June 2009. It is commonly referred to as "great" because the downturn lasted 18 months, the longest since the Great Depression, which spanned 43 months between 1929 and 1933.
Importantly, there is not uniform agreement on precisely how to define a recession. Most economists tend to follow economic statistician Julius Shiskin, who in a 1975 New York Times article defined an economic recession as two consecutive quarters of declining gross domestic product (GDP). Stated more simply, this means that a recession occurs when the economy shrinks consistently during a six-month period. Other economists prefer to link recessions to unemployment, defining a recession as a 1.5 percentage point increase in unemployment within a 12-month period.
Notably, Nevada is no longer in recession by either measure.
The US Bureau of Economic Analysis produces annual gross domestic product estimates at the state level. Nevada's economy shrunk by 0.91 percent in 2008, suggesting that the state's economy went into recession in that year. Nine other states reported negative GDP growth during 2008, including Michigan (-4.6 percent), Delaware (-2.7 percent), and Florida (-1.7 percent). By 2009, the recession had reached its trough and 41 states were reporting negative GDP growth. Nevada's economy shrunk by 5.6 percent in that year; only Wyoming (-12.1 percent), Oklahoma (-8.2 percent), Texas (-6.6 percent), and Arizona (-5.9 percent) reported sharper declines. In 2010, every state, including Nevada, reported positive economic growth.
According to the US Department of Labor Statistics, Nevada's unemployment rate first increased by 1.5 percentage points over a 12-month period in February 2008. In that month, both Florida and Nevada reported increases of 1.7 percentage points. Notably, however, it was North Carolina that was the first state to report a recession-level increase in joblessness. Between December 2006 and December 2007, North Carolina's unemployment rate jumped from 5.7 percent to 7.3 percent, or by 1.6 percentage points. By way of comparison, Nevada's unemployment increased from 4.2 percent in February 2007 to 5.9 percent in February 2008. Using this definition, Nevada remained in recession for only three months longer than any other state, with annual unemployment increases falling below the 1.5 percentage point threshold in August of 2010.
Economic cycles happen. Some are worse than others. The Great Recession was among the worst. That said, in much the same way as Nevada was never recession-proof, it is not today in a state of perpetual decline. The Great Recession has clearly given way to the Great Recovery; and, while it may be overshadowed by the residual effects of the longest and deepest recession in Nevada's modern history, the state's economy has expanded for nearly two years, new jobs are being created, business investment is increasing, visitor volumes are at peak levels and home prices are rising. Notwithstanding the challenges that remain, for many the transition from surviving a recession to taking advantage of a recovery is well underway.
There are those who like to say that Nevada ranks near the bottom of every "good" list and near the top of every "bad" list. Nevada has its challenges to be sure, but this generalization is little more than hyperbole. On closer inspection, Nevada's relative positioning is better than some might think.
Poverty is a key indicator of a community's relative wellbeing. As hard hit as Nevada has been during the Great Recession, the state's poverty rate remains below the national average. Nevada's 20 percent overall rate is lower than states like Arizona (25 percent), Texas (25 percent), and California (24 percent). Additionally, Nevada is also below the national average in terms of its share of children under 18 living in poverty.
A significant contributor to Nevada's lower rate of poverty is the state's higher household income. At $53,092 per year, Nevada reports the 18th highest median household income in the United States. This is higher than the median reported in states like Oregon ($50,938), New York ($50,656), Texas ($47,601), and Florida ($45,350).
In terms of business climate, Nevada also ranks well. The Small Business and Entrepreneurship Council's 2011 Small Business Survival Index placed Nevada second to South Dakota in terms of policy climate supportive of small business and entrepreneurship. The Kauffman Index of Entrepreneurial Activity identified the states experiencing the largest increases in entrepreneurial activity as Nevada, Georgia, Massachusetts, Tennessee and California (ranked in order). Although falling two spots in 2012, Nevada placed 12 in Chief Executive's Best and Worst States for Business, coming in ahead of Delaware (14), Wyoming (16), Oregon (42), Massachusetts (47), and California (50).
Nevada has also made great strides in energy conservation and sustainable development. Not only is Nevada home to some of the largest LEED-certified buildings in the world, the state also has more LEED-certified square feet per capita than any other state. Platinum certifications-the highest level achievable-have been awarded to the Desert Living Center, Origen Experience, and Guest Services buildings at The Springs Preserve and the Villa Trieste Residential Community developed by Pulte Homes. Additionally, the U.S. Energy Information Administration also ranks Nevada second in the nation in terms of net electricity generated from both geothermal and solar resources.
Perhaps the most notable of all is the Freedom in the 50 States rankings developed by the Mercatus Center at George Mason University. Researchers indexed and ranked each state relative to fiscal freedom, regulatory freedom, economic freedom, and personal freedom. Freedom is the foundation of American democracy, and a value held sacrosanct by Nevada residents. It should come as no surprise that Nevada ranked 6th highest on this list. That greater freedom, however, does not come without responsibility, including accountability for where Nevada ranks on every list that matters.
For the 12 months ending May 2012, Las Vegas recorded 39.32 million visitor trips. Reported with relatively little fanfare and in the general course, May's annualized visitor total might very well be one of the most important statistics in southern Nevada's recent history. May's tally represented the most visitors ever to Las Vegas in a 12-month period, breaking the all-time record of 39.27 million trips recorded back in February 2008.
A reflection of both resurgence and resilience, all but 800 of the 23,800 leisure and hospitality jobs lost since the February 2008 visitor peak have been added back to the economy. Visitors are spending more than ever on eating and drinking, shopping, sightseeing and transportation; and, thanks to a number of new direct international flights, Las Vegas is more accessible to major feeder markets abroad.
Las Vegas appears to have its mojo back. Roughly 16 percent of visitors came to Las Vegas for the first time in 2011. When asked about their likelihood to return, more than 60 percent of visitors indicated that they would "probably" or "definitely" return next year; 91 percent were inclined to recommend Las Vegas to others.
Now that the Las Vegas visitor base is growing again and the destination is more accessible than ever, perhaps the more important statistic is not the record number of people who came to Las Vegas during the past year, but rather, the vast pool of potential consumers who didn't.
The world's population is estimated at approximately 6.97 billion people. That means, after adjusting for repeat visitation, 6.95 billion people didn't come to Las Vegas over the past 12 months, about 99.7 percent of the world's consumers.
Now, I will fully admit that it is unlikely that a semi-nomadic Maasai tribesman and his clan are going to catch a flight from Kenya to Vegas for the weekend. There are also countless others who will likely never come due to financial limitations, religious or ethical objections, government oppression, or because Vegas is simply not their thing. Even if we assume that group accounts for 95 percent of the world's population, that leaves nearly 350 million potential consumers in the world, 325 million of whom missed out on the Vegas experience last year.
Although the global economy remains unsettled, the world's population is rapidly expanding its traveling consumer class. Forbes recently reported that Brazil has been adding 19 millionaires per day since 2007. A similar report in the Wall Street Journal noted that China now has over 1 million millionaires, an increase of 6.3 percent since 2010. The Economic Times reported in 2011 that India's high net worth population is not only at a record high, but is now the 12th largest on the planet. Germany, Japan, the UK, France, Canada, Switzerland, Australia, Russia and Italy are reporting a growing base of higher-income consumers.
Las Vegas may not be for everyone, but it remains one of the top tourist destinations in the world. The combination of improved accessibility and growing consumer freedom suggest southern Nevada is not done setting visitor volume records.
Much is written about the shortcomings of UNLV. Too often we measure our local university by what it lacks or the challenges that it faces-no medical school, no high-powered football program, no on-campus stadium, and nearly a third of local incoming freshmen requiring remediation, to name a few.
The measure of a university is not the makeup of its physical plant or the challenges it faces, but rather its ability to transform the lives of its students and its community.
UNLV held its first classes on campus in 1957. The largest public university in the state, UNLV currently serves 27,000 students, 22,300 of whom are resident Nevadans. During the past 55 years, UNLV has grown tremendously, providing a path to a better life for nearly 90,000 graduates. Notably, 53,900 of those graduates, about 61.2 percent, continue to live in southern Nevada.
Serving our community, UNLV was ranked by U.S. News and World Report as the 10th most diverse college in the nation for undergraduates in 2011. It also ranked 12th on the report's Most Popular Colleges list.
Beyond the sheer number of graduates are countless examples of how UNLV makes our community a better place to live. UNLV's Adopt-A-School program puts college students in at-risk elementary schools, promoting reading literacy and graduation to over 2,000 local students in 2011 alone. The UNLV College of Fine Arts partnered with the Las Vegas Art Museum to display its collection, which had been in storage since the museum closed in early 2011. Leading the way in sustainability, UNLV also recently earned a Silver Star from the Association for the Advancement of Sustainability in Higher Education with 60 percent of on-campus waste diverted from landfills and 95 percent of campus buildings maintained to sustainable operations standards.
The university also has a number of notable academic achievements. UNLV astrophysics professor Bing Zhang was credited in 2011 with providing the first evidence of a star being swallowed by a supermassive black hole, and sciences professor Dennis Bazylinski became the first researcher to identify and grow a new type of magnetic bacteria. UNLV's Sanford I. Berman Debate Team broke into the top 10 varsity teams in the National Debate Tournament rankings, and a group led by the UNLV School of Architecture was one of only 20 teams selected nationwide for the U.S. Department of Energy Solar Decathlon. One need not look far to expand this list.
The difficult reality is that only 21.5 percent of southern Nevada's adult population has a bachelor's degree or higher, a minimum requirement for more than 60 percent of available jobs. We are right to want more from our colleges and our universities, but in doing so we should never lose sight of UNLV's role in our community's success. As a proud graduate in 1997 and again in 2004, I for one will remain forever indebted to the university and its professors for the profound difference they made in my life. Go Rebels.
Currently in Nevada the average price per gallon for regular unleaded gasoline is about $3.80. Many of us remember when gas prices were advertised in cents, not dollars, and rising prices have created anxiety over reaching a tipping point where higher prices at the pump will cause local consumers to sharply curtail spending and visitors to make fewer trips to Las Vegas.
When analyzing rising gas prices, it is important to consider the impacts of price inflation. In 1990, the average price of gasoline nationally was $1.22 per gallon. Adjusted for inflation, $1.22 in 1990 has about the same buying power as $2.15 today. The U.S. average for all grades of gasoline currently is about $3.57 per gallon, suggesting that the real increased cost of gasoline between 1990 and 2012 is roughly $1.42 per gallon.
Okay, so in real terms we are paying $1.42 more than we did in 1990 for every gallon we consume. So, how much are we consuming?
In 1970, the United States averaged about 12.0 miles per gallon. By 1990, that figure had increased to 16.4 miles per gallon, and the latest available figure (2010) is 17.5 miles per gallon. Perhaps more importantly, the average fuel efficiency for 2011 model passenger cars was nearly 34 miles per gallon, suggesting households and businesses are getting more productivity out of every gallon they consume.
A shift from 20 to 30 miles per gallon is remarkably significant. The typical U.S. consumer drives about 12,000 miles each year. Without adjusting for inflation or fuel efficiency, that typical consumer's annual gasoline expenditure would have increased nearly 300 percent between 1990 and 2012, with costs rising from $732 to $2,142. When adjusted for buying power and increased efficiency, that increase is a much more manageable
11 percent during the same period, or from $1,290 to $1,428 annually.
An average western states household has 2.6 people and 2.0 vehicles. That same household spends approximately $2,200 per year on gasoline, about 3.23 percent of its gross annual income ($67,600). Notably, this is almost the exact percentage spent on gasoline in 1990 (3.15 percent), again suggesting that the combination of engineering and driving efficiency as well as rising incomes have largely offset higher gasoline prices.
Of course, fuel cost is an acute concern for visitor-dependent economies like Las Vegas. That said, we should be equally cautious not to overstate its impacts. A $1.00 increase in gas prices for a typical visitor driving from Los Angeles to Las Vegas averages roughly $20 per round trip. While that is $20 we would rather have spent in our local economy, it accounts for less than 3.0 percent of a typical visitor's expenditures. When you factor in the number of visitors per car, that impact percentage drops below 1.5 percent.
Five-dollar-a-gallon gasoline is coming, but so are cars that get 100 miles to the gallon. Continued advancements in transportation technology will not only reduce U.S. dependence on foreign oil, but also free up billions of dollars of household income, even at higher price points.
Where do Nevada residents go for quality health care? The airport. This pejorative quip has too of ten been used to reflect concern over the state's undersized health care sector. At 6.2 percent, Nevada has the nation's lowest concentration of health care industry workers. We rank third lowest in terms of physicians per capita; we rank dead last in registered nurses per capita. Not helping matters, the state also reports among the highest uninsured population shares and the lowest Medicaid payment rates in the United States.
Notably, health care was the sole sector of Nevada's economy to grow throughout the Great Recession, adding 7,600 new positions between December 2007 and December 2010-the balance of the state's economy shed 184,000 jobs during the same period.
Perhaps more important than the jobs that were being created is the type of investments being made. Consider the Cleveland Clinic Lou Ruvo Center for Brain Health, which opened on July 13, 2009. It may be known more for its unique architectural design than the extraordinary work that goes on behind its curved walls, but for patients suffering from Alzheimer's disease and a host of other cognitive disorders, the Lou Ruvo Center not only provides the highest standard of care, but cutting-edge medical trials and a compassionate support system for families.
U.S. News & World Report's "America's Best Hospitals" survey consistently ranks the Cleveland Clinic's neurology and neurosurgery program among the nation's 10 best. One visit to the Lou Ruvo Center, and it is easy to see why.
Also worth noting, Comprehensive Cancer Centers of Nevada had a dozen physicians named among the nation's best by U.S. News & World Report in 2011. Providing adult and pediatric medical and radiation oncology services, Comprehensive Cancer Centers has been affiliated with the widely respected Jonsson Comprehensive Cancer Center at UCLA for the past 15 years.
Three southern Nevada hospitals were also noted in the "America's Best Hospitals" report for high-performing specialties: Sunrise Hospital and Medical Center for Nephrology, St. Rose Dominican Hospital-San Martin Campus for Neurology and Neurosurgery, and St. Rose Dominican HospitalSiena Campus for Gynecology.
A number of Nevada hospitals have also received performance achievement Gold Plus awards from American Heart Association and American Stroke Association for their adherence to care guidelines for stroke patients. That said, only one Nevada hospital currently holds the Gold Plus award for both stroke and heart failure patient care-University Medical Center of Southern Nevada (UMC). Although UMC suffers from perception issues due to its status as the county hospital as well as perennial budget shortfalls, according to the American College of Surgeons, UMC operates Nevada's only Level 1 trauma center and only Level 2 pediatric trauma center.
Nevada has some of the most remarkable health care providers, researchers and facilities in the country. Unfortunately, they are too few relative to our population, and policy decisions that have reduced state and federal reimbursements to providers limit broader access to the highest quality of care. We should be cautious not to confuse quality of care with quantity of care. Economic and policy challenges aside, Nevada has a tremendous opportunity to build on the strengths of its health care system.
There has been a lot of discussion recently about diversifying Nevada's economy. Our state is among the nation's least diversified, with a disproportionate share of jobs, incomes and business receipts concentrated in the leisure and hospitality sector. This, combined with the fact that Nevada has lost nearly 180,000 jobs since May of 2007, has prompted a renewed focus on the form and substance of Nevada's economic policy.
In 2011, Governor Brian Sandoval championed Assembly Bill 449. Working closely with State Senate Majority Leader Steven Horsford, Speaker of the State Assembly John Oceguera and several other state legislators, AB 449 became law upon the Governor's signature on June 17 of last year. True to the Governor's campaign pledge, the legislation was extensive, ambitious and supported with increased funding.
The Governor rapidly appointed respected businessman Steve Hill as the state's new economic development czar, and the Nevada Board of Economic Development added notables like Heather Murren, Rob Roy, and Bill Weidner to its ranks. The newly minted Governor's Office of Economic Development retained the Stanford Research Institute and Brookings Institution to study the state's economic structure and identify opportunities; that report then became the basis for the state's new economic development plan released publicly in February of this year.
A recent survey of 401 Nevada businesses commissioned by the Nevada Development Authority (NDA) underscores the importance of Nevada's renewed focus on economic policy (notably the survey itself was of non-NDA member businesses). Roughly 88 percent of surveyed businesses indicated that attracting new companies to southern Nevada was either very important or critically important, and nearly two in every three suggested policymakers needed to take the lead on getting the state's economy back on track. When asked who played the most important role in bringing new businesses to the state, the Governor ranked atop the list, followed by organizations like the NDA, the Nevada Commission on Economic Development (now the Governor's Office of Economic Development) and the Nevada State Legislature.
Perhaps the most compelling finding from the NDA's survey is how business owners and operators responded when asked, "What is the single most important thing that can be done to attract new businesses to the region?" Nearly one in four (24.6 percent) businesses responded, "keep taxes low," with the second most popular response, "promote the state's pro-business environment," receiving 15 percent of the responses.
What is striking about the NDA survey is that businesses tend to believe Nevada's best strategy for attracting new businesses is to preserve the current environment and to make other businesses aware of Nevada's competitive advantages. Although businesses respected the need for change, improving education (11.4 percent), lowering the business cost environment (6.9 percent) and changing the mix of businesses (3.9 percent), all ranked significantly lower.
Nevada has undoubtedly elevated its game when it comes to economic development. And, with a quarterback like Governor Sandoval, it is a near certainty that we will move the ball down the field. In doing so, it will be important to keep in mind that the best strategy to attract new businesses to Nevada is making the state the best place in the nation to operate for the businesses that are already here.
Economists generally develop project ions of future economic conditions based on what has happened in the past. A one-percent rise in unemployment, for example, traditionally accompanies higher levels of poverty and crime but lower levels of health insurance coverage and divorce.
Analyses based on these relationships, commonly referred to as economic modeling, are routinely used by analysts to forecast tourism industry performance. Models are used to estimate how a one-dollar increase in hotel room rates will impact occupancy along the Strip or how a one-dollar increase in the price of gasoline will impact travel decisions in drive-in markets. Not surprisingly, models show that when the national economy grows, more people visit Las Vegas. As our community has witnessed over the past three years, these relationships also work in the opposite direction.
There is a general consensus that the Great Recession was the worst economic downturn since the Great Depression. Not only was there a near-collapse of our nation's financial system, but unemployment rose to its highest rate since 1983; and, for those lucky enough to keep their jobs, average hours worked fell to their lowest levels since 1964. Stock market and housing price declines devastated household wealth; bankruptcies and foreclosures skyrocketed.
Using the economic models of the time, the Las Vegas tourism economy should have essentially shut down in response to such punishing economic conditions. But it didn't.
In fact, at its lowest point-the 12 months ending August 2009-36 million people got on a plane, or in a car, or on bus and came to Las Vegas. Measured from peak tourism levels, Las Vegas lost only 3.3 million visitor trips, or about 8.4 percent of peak visitation. Visitors would spend in excess of $20 billion during that same 12-month period.
In economic terms, this was almost inconceivable; in Las Vegas terms, it was business as usual.
The genius of Las Vegas is its ability to constantly evolve, adapting not only to economic highs and lows, but to an ever-changing customer base. From ultra-luxury hotel suites to $1.99 breakfast specials, the people whose job it is to ?ll our 150,000 hotel rooms are unquestionably the best in the business. As the economy eroded, they refocused on core drive-in markets and grew international travel by developing an advertising campaign that centered on value and taking a break from the troubles of day-to-day life.
It worked. What the economic models said should have happened, never did because the Las Vegas Convention and Visitors Authority promoted a brand and Las Vegas' hotel-casinos delivered on it time and time again. Instead of fading away, southern Nevada's tourism industry is again leading our economic recovery and is on pace to record its highest visitor volume on record in 2012.
It's time to build some new models.
Imagine what it would mean for southern Nevada if Clark County schools were among the finest in the United States, with our students excelling in math and science, acing college entrance exams, and our high school athletes being academic All-Americans.
Imagine what we could do if our teachers and principals were nationally recognized for their innovative approaches to education and the extraordinary achievements of their students.
This is more than just a pleasant fiction; it is a side of the Clark County School District we hear far too little about.
In 2011, the Clark County School District had 34 students, from 14 high schools, recognized as National Merit Semifinalists. These students placed in the top one percent of 1.5 million high school juniors from 22,000 schools nationally.
Bonner Elementary School had 29 students who received a perfect score on either the math or reading portions of the 2010 -11 national proficiency exams, with three students receiving a perfect score on both the math and reading tests.
Hyde Park middle-schooler Ian Johnson managed a perfect score in the 2011 American Mathematics Contest, his second year in a row with a perfect score. Hyde Park actually had 11 students score in the top one percent in the nation, while another 12 students ranked in the top five percent nationally.
In 2011, Arbor View High School students received an 83 percent pass rate on the advanced placement calculus exam - 40 percent of those students received a perfect score. Two Green Valley High School students were recognized by the National Soccer Coaches' Association of America as scholar athletes; and Rancho High School senior Christopher Chacko earned a perfect score on the ACT college entrance exam, a feat achieved by less than 0.04 percent of 1.6 million test takers.
And what about our teachers and principals?
Rancho High School calculus teacher Susan Corbett was recently recognized by Stanford University for exceptional teaching; she was also invited to be a 2011 College Board Calculus AP Exam Reader for the third consecutive year.
Dr. Linda Archambault, principal of Gibson Middle School, was recognized as the National 2012 NASSP/Metlife Middle School Principal of the Year. The prestigious award, which recognizes outstanding principals committed to student achievement, had never before been received by a Nevada principal.
And our schools?
Green Valley High School was named one of Newsweek's Top 1000 Public Schools in 2011, its seventh consecutive year receiving the distinction. Green Valley has also won more Presidential Awards for Excellence in Mathematics/Science Teaching than any other high school in America.
A standout in the arts, the Las Vegas Academy is one of only three high schools in the nation to win the "Gold Grammy" award. Grammy Signature Schools are recognized as the top U.S. public high schools for contributions to music education. The Las Vegas Academy has received a record nine Grammy Signature School Awards and been awarded seven Gold Grammys.
All that is left is to imagine how these achievements might translate into greater success for more of the district's nearly 310,000 students. This will require that teachers and principals be evaluated based on student achievement, and that students and their parents take greater responsibility for underperformance and discipline problems.
But, these changes alone will not entirely solve Nevada's most pressing dilemma. Making education a priority in more than name only will require a critical look at a fiscal system that requires two-thirds of legislators to generate new funds for education, but only a simple majority to make cuts to schools. Simply telling our education system to do more with less, while also failing to make other systemic changes, has proven to be highly ineffective strategy. With a new superintendent at the helm whose passion and sense of urgency is making a marked difference in our schools, there has never been a better time for our community to rally around our educators to effect the change our students deserve.
At the end of each year, I get a number of calls and emails asking about our forecast for the year ahead. Forecasting tends to be equal parts astronomy and astrology, as the uncertainty of world events routinely confounds even the most skilled economists. Too often, a desire to foresee the future comes at the expense of lessons to be learned from the past. As we close out 2011, I believe it is well worth our time to look at just how far our community has come over the past 12 months.
Transition from employment losses to employment gains. At the close of 2010, southern Nevada's unemployment rate was 15.1 percent. This was the highest rate of joblessness for the month of December in more than 30 years, with the region's workforce shrinking by nearly 15,000 positions year-over-year. At the close of 2011, southern Nevada's unemployment rate will have dropped to around 13 percent, if not slightly below, with the region's economy creating more than 10,000 new positions.
Population base expanding. At the close of 2010, annual driver's license surrenders (a key indicator of population in-migration) totaled 51,150, the lowest year-end value recorded since 1993. Driver's license surrenders will approach 60,000 in 2011, translating into an annual growth rate of roughly 17 percent. At the same time, electric meter connections (a key indicator of housing occupancy) are reporting a growth rate of approximately 1.3 percent, suggesting that southern Nevada's population is expanding, and we are beginning to work through our housing surplus.
Employee wages and salaries growing. In 2010, wages and salaries paid to Nevada workers were essentially flat after falling by more than 8 percent annually in both 2008 and 2009. Employer contributions to pensions and insurance funds fell for the third consecutive year, decreasing by 0.8 percent to $11.8 billion in 2010. Through the first half of 2011 (latest data available), employee compensation has increased by 1.6 percent, with both wages and salaries and benefits contributions reporting increases.
More occupied hotel rooms. In December 2010, Las Vegas hotels and casino-hotels reported an occupancy rate of 72.4 percent, having averaged 80.4 percent during the year. This was the lowest rate of hotel room occupancy reported since 1991. During 2011, occupancy rates have increased by an average of 4.1 percentage points; at the same time average daily room rates have increased by nearly 11 percent. Should this trend continue, not only will southern Nevada report occupancy rates approaching 85 percent, but the market will also record a greater number of occupied hotel rooms than at the market's peak in 2008.
Consumers consuming again. Taxable retail sales were $28.3 billion in 2010. Adjusted for inflation, this was the lowest level of consumer spending in almost a decade, bringing to an end 35 consecutive months of annualized declines. By contrast, every month in 2011 except for April witnessed positive growth in taxable spending, with the most recent figures (September 2011) reporting a growth rate of 10.5 percent. Notable improvements were apparent in vital spending categories such as motor vehicle dealers (+8.0 percent), restaurants (+17.3 percent), and clothing stores (+19.6 percent).
When it comes to forecasts, three economists can generally agree if two of them are dead. We can only hope that southern Nevada carries the momentum regained during 2011 into 2012.
I recently received a call from a client based in St. Louis. An astute and seasoned businessman, he commented that watching the Las Vegas economy from Missouri was like watching reality TV. Clearly in response to what he viewed as a series of unbelievably dismal economic reports, he asked: "Does anyone still have a job?"
After pausing for a moment to decide which Snooki joke might be most appropriate in this situation, it occurred to me that he wasn't joking at all. I agreed that southern Nevada has been particularly hard hit by the recession, and that our unemployment, foreclosure, and bankruptcy rates were all at or near the nation's highest. I then offered some additional statistics I suspected he had not come across.
I asked if he was aware that southern Nevada had added 10,500 jobs during the past 12 months and that our annual increase, 1.3 percent, was higher than the national average and the rates reported by 248 metropolitan areas across the United States. He was not.
I asked if he would be surprised to know that the Las Vegas metropolitan area reported the largest unemployment rate decrease in the nation between September 2010 and September 2011. He was.
I asked if he was aware that southern Nevada's leisure and hospitality sector had reported positive year-over-year job growth for 20 consecutive months, adding 14,400 positions since bottoming out in November 2009. He was not.
I asked if he knew that health and education services companies added 8,600 jobs since the Great Recession began in December 2007, not once reporting a negative annual growth rate; or, that in September 2011 the business and professional services sector, now accounting for 1 in 8 Las Vegas jobs, reported its highest annual employment increase since October 2006. He did not.
I asked if he thought that it was meaningful that even the hardest hit sector of our economy, construction, has added jobs for six out of the past nine months. He conceded that it was.
My client then responded that I was merely pointing out a few bright spots in an otherwise decaying market. After reminding him that I was attempting to respond to his original question ("Does anyone still have a job?"), I suggested that my intent was merely to highlight some pockets of prosperity obscured under a pile of bad economic news.
Not wanting to leave my client with the impression that the sum of the parts was somehow less than the whole, I asked him to consider the concept of core employment. Core employment is total employment less government and construction jobs, which are generally dependent on investment decisions and prosperity in other sectors of the economy. Core employment has added 16,600 positions since October 2010, up 2.5 percent during the past 12 months. It has also reported year-over-year growth for 10 consecutive months and 15 of the past 17 months.
From the outside, I imagine that Las Vegas' economic drama does look like a particularly turbulent season of Survivor. That said, like most reality TV shows, that view likely bears little resemblance to reality.