Cover, Nevada State Bank Economic Briefing

September 2016

Drivers in Nevada and the rest of the United States have enjoyed low gas prices for the past two years, thanks to the age-old fundamentals of any economy: supply and demand. When oil prices were climbing in the wake of the Great Recession, high global demand, particularly in the surging Chinese economy, and limited supply pushed oil prices above $100 per barrel. Today, the price of oil has been cut in half as the result of increased supply and weak demand.

Double-digit economic growth in China is long gone, and the United States has been weaning itself off of foreign oil, partly due to successful efforts to increase energy independence and build domestic oil reserves. Those prevailing competitive forces in the oil market are responsible for reducing the price consumers pay at the pump, and that savings at the pump translates to more spending on other goods and services.
Consumers have enjoyed additional discretionary income from lower gas prices. According to the U.S. Consumer Expenditure Survey, an average household spent $2,090 on gasoline in 2015, which was $666 less than the 2012 estimate. In Nevada, this translates into $694 million in additional discretionary income for the more than 1 million households in the state.

A recent study by JPMorgan Chase & Co. revealed people spent roughly 80 percent of savings from lower gas prices and used the remaining 20 percent to increase savings or pay down debt. In Nevada, taxable retail sales have increased nearly 10 percent from the same time last year, suggesting that Nevadans are using their gas savings to purchase more consumer goods. This additional activity helps the overall economy, of which two-thirds is driven by consumer spending.

Lower gas prices are also a positive sign for the state’s core tourism economy, as they make getting to Nevada a cheaper proposition, whether by ground or by air. Traffic counts between southern Nevada and California have increased 4.7 percent over the past year, while traffic at the California border with Washoe County has climbed 7.5 percent. Lower gas prices might very well be driving additional road trips from Nevada's largest source of visitors, and those visitors will have more money to spend when they arrive.

In addition to spending more on other goods and services, Nevadans appear to be driving more because of the lower gas prices. When Nevadans were paying more than $4.20 per gallon at the pump in recent years, car owners reduced their gas consumption by driving less or buying fuel-efficient cars. From 2008 to 2012, overall gas consumption in Nevada decreased at an average annual rate of 1.3 percent. By contrast, the number of gallons of gasoline sold statewide in June was 8.7 percent higher than June 2014, when gas prices were near their recent peak.

Motorists are also driving more today. In the past 15 years, vehicle miles traveled in Nevada grew at about 2.5 percent annually, according to the Nevada Department of Transportation. In 2014 (most recent year available), annual vehicle miles traveled climbed 8 percent over the prior year, suggesting that drivers in the state were driving more, at least in part because of reduced spending at the pump.

Historically, gas prices were inflated due to high demands and OPEC’s monopoly power. Since 2014, the presence of competition in the oil market, particularly from the United States, has kept downward pressure on gas prices. This trend is forecast to continue through at least next year, putting more money in the pockets of Nevadans and providing a significant boost to the statewide economy.

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August 2016

College students across Nevada are heading back to campus this month to pursue their higher education goals. Many of them will go into debt to finance their tuition, rent and other expenses of attending college. These costs are considered an investment toward realizing the greater employment and economic opportunities provided by a college degree. Yet for many college graduates across the nation, especially those who finished school during the nation’s worst economic crisis in eight decades, student loan debt has instead served as a roadblock to establishing financial independence in early adulthood. However, in Nevada the student debt trends run counter to the national narrative, as Silver State students leave college with far less debt than most of their peers around the country.

Across the United States, the collegiate class of 2014 graduated with an average student loan debt balance of $28,950 (a 2 percent increase from 2013), according to an analysis by The Institute for College Access and Success of student debt for graduates of public and private nonprofit four-year institutions. Nevada student debt averaged $20,211, which ranked as the third-lowest in the country behind only Utah and New Mexico. On the high end of the student debt spectrum were East Coast states Delaware, New Hampshire and Pennsylvania, each of which carried average student debt loads of more than $33,000. Nevada also performed well in terms of the proportion of students graduating with college debt. Nationally, seven in 10 graduates had loans to pay off, while in Nevada less than half of the 2014 class (46 percent) graduated with debt. That rate tied with Wyoming for lowest in the country.

Historically, the rise in average student debt has far outpaced the rate of inflation. On a national level, college debt between 2004 and 2014 increased 56 percent, from $18,550 to $28,950, more than twice the inflation rate during that time. Since 2014, Delaware and Maryland saw the greatest increases in graduating class debt as their totals more than doubled, while Idaho, Louisiana and Iowa reported the smallest 10-year increases at less than 25 percent. In Nevada, average student debt load increased by 43 percent (from $14,144 to $20,211), which ranked as the 11th-lowest increase over the decade.

Nevada’s low student debt totals can be attributed to a combination of factors. For one, Nevada offers the seventh most affordable in-state college tuition and fees. In addition, Nevada offers the Millennium Scholarship to college entrants who meet certain GPA, testing and course requirements in high school.

Within Nevada, the state’s two flagship universities recorded noticeable differences in average student debt balances. While the University of Nevada, Reno and the University of Nevada, Las Vegas had comparable yearly in-state tuition and fees ($6,610 at UNR and $6,690 at UNLV), the average debt carried by UNR grads was $22,500, 21 percent higher than the $18,540 for UNLV graduates. At each college, 46 percent of students graduated with debt, matching the statewide average. Part of the difference might be attributed to UNLV students being 6 percent more likely to receive Pell Grants, the federally-funded scholarships awarded based on financial need. Overall, the average UNLV freshman received a financial aid package of $11,030 in grants, loans, scholarships and work-study in the first year in college, which was 33 percent higher than the $8,280 received by the average incoming UNR student.

In today’s economy, a college degree is key for long-term employment and financial security. In 2014, high school graduates with no college experience were twice as likely to be unemployed compared to the portion of the labor force equipped with a bachelor’s degree or higher, and college graduates also earn more over their working lifetimes than workers with high school diplomas or less. Despite these benefits, the financial costs of pursuing a higher education can feel more like a burden than an investment for many Americans. In Nevada, however, low costs and widely accessible scholarship programs have helped students graduate with a degree in hand, but without the high student debt balances of their peers in most other states.

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July 2016

Nevada’s healthcare industry plays an important role in both the medical and economic well-being of the state. The sector has been an important source of job growth and economic diversification throughout the state, and it will continue to be so, given the aging and growing population base.

From 2003 to present, Education and Health Services has been the only sector in southern Nevada to demonstrate positive year-over-year growth in private employment every single month. The sector grew even through the economic downturn, and since 2007 it has added 21,658 jobs, more than any other sector. It has remained among the fastest-growing job sectors, recording year-over-year growth of 5 percent or better in each month since April 2015. That rate has accelerated in 2016 with year-over-year growth near or above 8 percent in each month through May, and the 8.2 percent growth recorded in that month ranked second behind only 12.4 percent growth in construction sector employment.

During this long period of consistent growth, Education and Health Services has become a larger share of the southern Nevada job base, growing from 7.7 percent in 2007 to 10.6 percent today. This trend is projected to continue into the coming decade with the addition of 20,000 jobs through 2030, according to the state demographer. Education and Health Services employment in Washoe County has also experienced a growth trend. Since 2007, the sector has expanded 15.6 percent with the addition of 3,200 jobs.

The benefits of employment growth in healthcare are enhanced by the industry’s higher-than-average wages. The average wage in the Education and Health Services sector in southern Nevada pays $8,100 more compared to the average private wage of $43,700 For example, paramedics (most of whom are equipped with a vocational certificate and some college) earn an average salary of $40,400 per year. Physician assistants may begin practicing with a master’s degree and earn an average salary of $94,700 annually in Nevada. Registered nurses are trained through associate’s or bachelor’s degree programs and earn an average annual salary of $79,300 in Nevada.

The growing demand for healthcare services and workers remains a critical issue for the Nevada healthcare industry. With the implementation of the Affordable Care Act (“ACA”) in 2014, the uninsured rate in Nevada dropped from 20.7% in 2013 to 15.2% in 2014. Since Nevada expanded Medicaid eligibility under the ACA, enrollment in the state-run insurance program nearly doubled from 326,000 in 2013 to 623,000 today. Plans through the state’s health insurance marketplace have given coverage to an additional 88,145 Nevadans this year. Enrollment in Medicare, the federal insurance plan for seniors, has increased about 5 percent each year statewide and in Clark and Washoe counties. Medicare enrollment is expected to continue to grow with the aging of the Baby Boom generation and Nevada’s attractiveness as a retirement destination, further increasing demand for healthcare services as older people require more frequent and higher levels of care.

These demand trends will provide both opportunities and challenges for Nevada’s healthcare industry, which has a profound shortage of medical professionals. Overall, healthcare and social assistance workers comprise 9.9 percent of the statewide workforce, which is well below the national average of 15.5 percent. Nevada also trails most of the nation in its supply of doctors. The state ranks 49th in the United States in active licensed physicians per 100,000 residents (179.7 vs. 234.7). To keep par with the national average, the University of Nevada School of Medicine estimates the state needs an additional 2,900 medical doctors.

Recognizing the state’s medical needs and economic opportunities, the Governor’s Office of Economic Development and regional development agencies such as the Las Vegas Global Economic Alliance have identified the healthcare industry as a priority for investment. Other initiatives and investments are focused on growing the healthcare supply, including the ongoing development of the University of Nevada Las Vegas Medical School, the $1.2 billion Union Village medical and wellness project in Henderson, and a potential 165,000-square-foot expansion of the VA Sierra Nevada Health Care System in Reno.

These projects, and many others, will be key to expanding Nevada’s healthcare sector and capitalizing on opportunities to improve and diversify the state economy while enhancing the quality of life for its residents.

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June 2016

Within the past year, a number of multimillion-dollar investment projects have been announced or broken ground in southern Nevada. The list includes new properties, expansions or rebrands of existing resorts, and a variety of entertainment and retail projects that expanded Las Vegas’s nongaming amenities. This recent surge in activity signals a renewed confidence in the Las Vegas tourism sector that is grounded in the industry’s rapidly improving fundamental indicators.

In all, over $13.6 billion is currently earmarked for southern Nevada tourism-related investments that are either planned, proposed or under construction. In the past six months, announced projects include the $1.6 billion Wynn Paradise Park, a $1.4 billion domed football stadium proposal by Las Vegas Sands and Majestic Realty, the $450 million Monte Carlo redesign as Park MGM, and a 17,500-seat music venue by Las Vegas Sands and Madison Square Garden Co. These new projects join a number of under-construction or recently completed projects, including the $4 billion Resorts World Las Vegas, $375 million T-Mobile Arena, $373 million Lucky Dragon Hotel and Casino, the $70 million Mandalay Bay Convention Center expansion and a $72 million remodel of the Thomas & Mack Center.

The influx of investment is closely tied to the rising trend in overall Las Vegas visitation. During the recession, southern Nevada’s leisure and hospitality industry was hit hard, dropping by 2.9 million annual visitors to a low of 36.4 million in 2009. Since then, visitation has recovered and surpassed pre-recession highs, setting annual visitor records in 2012, 2014 and 2015. Visitor volume in Las Vegas is on pace to set another high this year. Visitation reached a record of 42.7 million visitors in the 12 months through April 2016, which represented a 3.6 percent increase over April 2015. Visitation trends since the end of 2013 have been particularly strong, growing 7.6 percent with the addition of 3.0 million visitors.

The convention segment of Las Vegas visitation has outperformed broader trends in recent months. In April 2016, trailing 12-month convention attendance climbed 14.9 percent, and the 6.0 million conventioneers during that period marked the highest 12-month total since October 2008. Although the number of annual convention delegates has not returned to pre-recession peaks, the latest figures were just 5.5 percent below the high of 6.4 million annual delegates reported in May 2007. Amid the recent growth trend in convention attendance, a number of recently completed or planned projects involve expanding space to capture convention and meeting business. These include the recently completed Mandalay Bay Convention Center expansion, the planned $1.4 billion Las Vegas Convention Center expansion and renovation, and smaller planned projects at ARIA and Wynn Las Vegas that will increase convention and meeting space.

A key component of southern Nevada’s tourism economy is McCarran International Airport, which is the first stop in Las Vegas for roughly four out of 10 visitors. Annual passenger traffic at McCarran surged 6.9 percent in April 2016 to 46.3 million. That total represents a 16.4 percent improvement over the post-recession low of 39.7 million passengers in the 12 months through September 2010. The majority of that growth has been realized since the end of 2014. Since then, annual passenger totals have grown by 4.4 million, or 10.5 percent. McCarran is well positioned for this growth due to the 2012 opening of the $2.4 billion Terminal 3 and ongoing improvements that include a current $51 million infrastructure project.

The recent growth trends in visitor volume, convention attendance and airport traffic, particularly over the past 18 months, are a welcome sign for a southern Nevada economy that struggled through the economic downturn. They are also welcome to investors who, after a long period of caution, are once again committing significant capital resources to large-scale projects throughout the community.

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May 2016

Nevada’s construction industry has long been one of its most important, driving employment and fueling economic activity in support of the state’s fast-growing population. The sector was hit the hardest during the economic downturn, losing more than half of its job base as homebuilding and other construction demands dwindled. However, in recent years the sector has rebounded, posting strong gains among several key indicators as the state’s demand for homes, shopping outlets, tourism amenities and other construction projects has been revived with the overall improvement in the state economy.

At its peak in 2006, the construction industry employed nearly 143,000 people, or about one in 10 working Nevadans. In the ensuing six years, the collapse of the housing market and the economy as a whole triggered the loss of about 91,000 construction jobs, which accounted for roughly two-thirds of all job losses in the state during that period. Yet since the end of 2012, construction employment has grown four consecutive years either at or near double-digit annual rates, adding 19,200 new jobs through March 2016 on a trailing 12-month basis. That gain represents one in every six new jobs in the state over that time.

The majority of the employment increase has been realized in Southern Nevada, where the construction industry added 14,900 jobs, on a trailing 12-month basis, between December 2012 and March 2016. In the most recent data available, construction employment in the region grew to 52,242, which represents the highest 12-month average since June 2010. In Reno, construction jobs rose to 13,108, the highest level since July 2009. Over the past year, construction employment growth statewide (+9.4 percent), in the Las Vegas area (+11.7 percent), and in the Reno area (+10.2 percent) comfortably outpaced job growth rates in all other sectors and Nevada’s overall employment growth rate of 3.0 percent. Despite the recent gains, construction industry employment remains well below pre-recession levels. The trailing 12-month total of 71,125 jobs reported statewide in March 2016 represents less than half of the 143,550 jobs at the peak in October 2006.

The rise and fall in construction jobs has tracked closely with homebuilding activity. New home construction was a primary driver of construction job growth in the mid-2000s, with the combined annual total of residential building permits in Clark and Washoe counties peaking at 45,500 in 2005. Annual homebuilding slowed during the next two years before plummeting during the recession and prolonged economic downturn. The low point came in 2011, when 5,662 residential building permits were issued in Clark and Washoe counties. The number of annual permits has more than doubled since that low. In the 12 months through March 2016, 14,490 residential permits were issued in the two counties, about two and a half times greater than the 2011 low. In the past 12 months, Clark County permitting grew by 14.0 percent, and Washoe County permits expanded by 16.8 percent.

Broader trends suggest demand for new homes will continue. The statewide population grew by 1.8 percent in 2015, ranking fifth in the United States, and its job growth rate has consistently ranked among the top five states since April 2014. Tourism demand has also shown a consistent upward trend, with the trailing 12-month total in Las Vegas visitor volume growing 3.8 percent in March 2016 to an all-time high of 42.7 million people.

In Southern Nevada, recently completed projects such as the T-Mobile Arena, the Thomas & Mack Center renovation, the Mandalay Bay Convention Center expansion, several hospital expansions and shopping mall renovations have helped drive the construction industry rebound. Additional projects either under construction or soon to be under construction such as Resorts World Las Vegas, Faraday Future, Lucky Dragon hotel and Project Neon are among those that will help support the industry in coming years.

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April 2016

Across the Nevada economy, the majority of key indicators reported sustained and steady growth through 2015 and into 2016. During that period, employment, wages, taxable retail sales and other important metrics experienced some of the best stretches of annual growth since the recession. One exception has been gaming revenue, which has remained stagnant for a year and a half.

Since November 2014, trailing 12-month growth rates in statewide gross gaming revenue have not exceeded 0.9 percent or dropped by more than 1.7 percent. In the most recent figures, gaming revenue in February 2016 reached $11.2 billion for the prior 12 months, the highest level since August 2014 and a modest 0.8-percent improvement compared to a year earlier. The statewide trend is heavily influenced by gaming on the Las Vegas Strip, where more than half of Nevada’s gaming revenue is generated. In February 2016, trailing 12-month gaming revenue on the Strip dropped 1.3 percent from the prior year to $6.3 billion. That marked the 12th consecutive month of year-over-year decline.

Contrary to the statewide trend, other major gaming markets in Nevada avoided the downward trend and, in some cases, recorded significant annual growth during the same period. Downtown Las Vegas led the positive growth trend as its trailing 12-month gaming revenue increased by 9.0 percent over the prior year to $552.5 million, which is the highest annual total since April 2009. In contrast to the Strip, Downtown Las Vegas gaming revenue has reported 24 consecutive months of annual growth, including growth rates of 3 percent or greater in each of the most-recent 10 months. Meanwhile, the Las Vegas Locals market reported 12-month gaming revenue of $2.2 billion in February 2016, a 4.0-percent increase over the prior year, and in Washoe County, gaming revenue climbed 2.6 percent over the year to $780.5 million.

The recent lackluster results on the Strip, and the state as a whole, can be traced to the influence of baccarat, the high-stakes table game that is popular among Asian gamblers. For much of 2013 and 2014, baccarat winnings accounted for nearly 80 percent of statewide gaming revenue growth. Over that two-year period, trailing 12-month totals for baccarat climbed nearly 18 percent compared to less than 1-percent growth for all other gaming revenues. However, that trend has reversed in the past year amid China's economic slowdown and an ongoing anti-corruption campaign by the Chinese government that has depressed high-end baccarat play in both Macau and Las Vegas. Annual growth in baccarat revenue has declined for 12 straight months, including double-digit declines as high as 23.7 percent in the 10 most-recent months.

Those declines have masked positive growth in all other gaming revenue. Excluding baccarat, annual gaming revenue in Nevada has increased for 13 straight months, including eight consecutive months of at least 2-percent growth. Excluding baccarat, statewide trailing 12-month gaming revenue in February 2016 increased 3.7 percent over the year to $9.9 billion. That was the highest annual total since July 2009 and an illustration of the effect volatile baccarat revenue has in obscuring recent gains by the overall gaming market.

While gaming revenue continues to be a shrinking piece of the revenue pie for casinos across the state, it still accounts for more than 43 percent of all hotel-casino revenue in Nevada. Ongoing struggles in China’s economy could continue to negatively influence baccarat play and revenue, which will impact overall gaming revenue trends on the Strip and statewide. However, it appears that those downward pressures will be eased to some degree by continuing gaming revenue growth in non-Strip markets and by gambling revenue from games other than baccarat.

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March 2016

For Nevada’s housing market, 2015 marked a year of steady across-the-board improvement. Some key metrics rebounded after a lackluster 2014, while others continued their strong annual growth trends from the year before. Most industry indicators remain below their pre-recession peak levels, but the widespread gains in 2015 set a solid foundation for continued growth into 2016.

Throughout the state, home prices reported positive growth that pushed Nevada’s seasonally adjusted house price index up 12.7 percent in the fourth quarter. That year-over-year growth rate led the nation and returned Nevada to first place in the national rankings after spending the year’s other three quarters in either second or third place. In 2014, Nevada topped the national rankings in year-over-year home price appreciation in every quarter.

At the regional level, both southern and northern Nevada reported annual home price increases for both the existing and new home markets. In the Las Vegas area, the trailing 12-month median existing home price climbed to $183,606. The 9.1-percent annual growth rate was notable; however, it was not as high as the 13.7 percent reported in 2014. Existing home prices grew faster in Washoe County, where the trailing 12-month median existing home price increased 14.7 percent to $269,192. Washoe County’s 2015 growth outperformed the 13.6-percent growth of the prior year.

While new home prices improved, their growth rate slowed markedly compared to the previous year. In the Las Vegas area, the trailing 12-month median new home price rose 7.0 percent to $312,423, an eight-year high. However, the price growth represented a 5-point drop from the 12.3-percent growth the year before. Meanwhile, in Washoe County new home price growth did not keep pace with the Southern Nevada market. The trailing 12-month median new home price of $343,726 was 4.5 percent higher than in 2014, yet that growth rate was well off the 12.0-percent growth recorded a year earlier.

The home price gains in 2015 helped reduce the number of underwater homes in Nevada to 18.7 percent in the fourth quarter, according to real estate research firm CoreLogic. That was an improvement from the 24.2 percent reported the prior year, yet Nevada still led the nation with the highest share of underwater homes. On a local level, the Las Vegas metropolitan area closed 2015 with the second-highest share of underwater homes at 21.3 percent.

Home-selling activity picked up in 2015, marking a turnaround after declines in 2014. In Las Vegas, existing home sales for the year climbed to 43,127 (+1.8 percent), a significant improvement from the 11.0-percent drop in growth the year before. Washoe County reported an even larger reversal in existing home closings, which grew 9.2 percent to 6,912. In 2014, that figure had declined by 5.5 percent from the prior year. New home closings in Las Vegas last year reached 6,950, a 13.8-percent increase from 2014 made more notable compared to the 13.7-percent decline in annual growth between 2013 and 2014. In Washoe County, new home closings last year surged 50.0 percent to 1,458.

The foreclosure picture in Nevada steadily improved last year as new filings dropped to a post-recession low of 5,404, a 25.2-percent decline from 2014. The number of homes in foreclosure also showed marked decline. In the fourth quarter of 2015, the number of homes in foreclosure dipped 31.5 percent to 9,799, which is a fraction of the 56,028 homes in foreclosure at the peak in early 2010.

Trends in the overall economy, particularly job and population growth, suggest that demand for homes will continue to rise. Price points will be a key element to monitor throughout 2016 as price gains may tighten due to growing concerns over affordability.

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February 2016

Last year finished as one of the best in recent memory for Nevada as most key economic indicators continued or improved upon the positive trends of 2014. Growth in the number of jobs, wages, taxable retail sales, and housing prices were among the primary indicators that closed 2015 on an upward trend.

The state’s expanding jobs market led the good economic news headlines all year. By December 2015, the trailing 12-month employment average had grown by 37,900 jobs over the previous year, a 3.1-percent improvement. That growth rate ranked sixth-best in the nation. However, that mark ended a streak of 20 consecutive months where Nevada was ranked fifth or better. If state employment continues to expand at about the same rate in 2016, the total number of jobs will return to pre-recession levels later this year. In both the Las Vegas and Reno metro areas, employment on a trailing 12-month basis increased by 2.9 percent.

Annual job growth reached positive levels in every sector except financial activities, and a number of sectors outperformed the statewide average, including construction (+9.0 percent), education and health services (+5.0 percent), leisure and hospitality (+4.5 percent), and transportation and warehousing (+3.9 percent).

The positive employment trend pushed Nevada’s seasonally adjusted monthly unemployment rate down to 6.4 percent in December 2015, 0.6 percentage points lower than a year earlier. That was the lowest year-over-year improvement since 2011 and did little to improve Nevada’s ranking among states with the highest unemployment rates. In December 2015, the state held the third-highest unemployment rate behind only Alaska and New Mexico.

However, good news concerning Nevada’s labor force underlies the lagging improvement in the unemployment rate. The state’s labor force, which is the group of people who are working or actively looking for a job, grew by a seasonally adjusted 1.9 percent in 2015. That rate, 11th-best in the nation, suggests that Nevada’s job market is attracting new workers through a combination of residents moving in from other states and by formerly discouraged unemployed workers rejoining the labor market because of improving job prospects.

The labor market showed other signs of strength at the end of 2015. Although average weekly hours remained flat at 33.6 (+0.5 percent), average weekly wages continued a two-year surge. For the year, weekly wages on a trailing 12-month average grew by a nation-leading 5.2 percent to $736.92. Over the past two years, weekly wages have increased by 8.9 percent. The rise in wages in Nevada mirrors the national trend where private employers are increasing pay to attract and retain workers in a more competitive labor market. That trend is more pronounced in Nevada, which doubled the U.S. weekly wage growth rate of 2.4 percent.

Other key indicators made positive strides in 2015. Statewide taxable retail sales, the primary measure of consumer activity, climbed to $51.5 billion in November 2015 (latest data available). The 12-month total increased by $2.9 billion for a 5.9-percent annual growth rate. Meanwhile, gross gaming revenue finished the year at $11.1 billion, a 0.9-percent increase over 2014. Finally, housing prices in Nevada continued their strong recovery by recording year-over-year price appreciation of 12.4 percent in the third quarter of 2015 (latest available). Nevada’s housing price increase was second-best in the nation and double the U.S. average of 5.7 percent.

As 2016 began, the Nevada economy was poised to continue building upon the many positive trends that carried it through 2015 and repair more of the lingering damage left behind by the Great Recession.

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January 2016

For the second consecutive year, the number of people who visited Las Vegas in 2015 surpassed the projections by the Las Vegas Convention and Visitors Authority. Last year, 42.3 million people visited Las Vegas, a 2.9 percent bump from 2014 and well ahead of the 41.6 million tourism officials had projected.

The health of the state economy is closely interconnected with the health of the tourism industry. Spending by tourists and conventioneers accounts for about a quarter of Nevada’s gross domestic product, while the leisure and hospitality industry accounts for three out of 10 jobs and a quarter of all employee wages in Nevada. Because of this relationship, it is little surprise that Nevada’s positive 2015 was supported by strong fundamental growth within the tourism industry.

In 2015, job growth was one of the strengths for Nevada’s economy. Through November, more than 39,100 jobs were created statewide in the previous 12 months, good for an annual growth rate of 3.2 percent that ranked fourth-best in the nation. Employment within the leisure and hospitality industry grew by 4.7 percent, adding 15,800 jobs, or 40 percent of all new jobs statewide.

Rising employment over the past year has significantly boosted the number of employees per hotel room in Las Vegas. That number plummeted during the Great Recession and has spent the past six years slowly recovering. The industry now employs nearly two workers for every room, the highest level since 2008 and another indicator that the tourism industry is nearer to a full rebound.

Underlying the positive employment trends is a growing revenue trend for casino operators in Nevada. According to the recently released Nevada Gaming Abstract Report, total revenue for casinos climbed from $23.9 billion in fiscal year 2014 to $24.6 billion in fiscal year 2015, a 2.9 percent annual growth rate. That rate came down slightly from the 3.6 percent reported a year earlier.

Last year’s overall revenue growth was boosted by strong performances in several revenue categories. Room and food revenue grew by 5.0 percent and 5.2 percent, respectively, while revenue in the “other” category, which includes entertainment and shopping, climbed 7.7 percent. Beverage revenue grew by 3.0 percent, and gaming revenue dropped by 0.2 percent. Although the dip in gaming revenue was modest, it marked the first year-over-year decline since 2010 and was a significant fall from the 2.4 percent growth in 2014.

Despite the dip, gaming revenue continued to make up the largest share of overall casino revenue (43.2 percent) in Nevada. Remaining revenue was attributed to rooms (22.0 percent), food (15.3 percent), other (12.5 percent), and beverages (7.0 percent).
The statewide trends were mirrored in Clark County, which accounts for 90 percent of casino revenue in Nevada. Overall revenue climbed by 3.0 percent to $22.0 billion, which was down from the 4.0 percent growth rate in 2014. Revenue generated by rooms, food, and “other” grew by 5.4 percent or more, while gaming revenue dipped by 0.6 percent. Like the statewide figure, it was the first gaming revenue drop in Clark County since 2010.
The statewide gaming revenue dip was driven by 2.5 percent decline on the Las Vegas Strip, which brought in $151.5 million less gaming revenue in 2015. However, gaming revenues elsewhere in the state trended in the opposite direction. In Downtown Las Vegas, gaming revenue climbed by $20.2 million (4.0 percent), and in Washoe County it increased by $18.6 million (2.5 percent).

In 2016, continued improvement in the national economy, more direct flights to McCarran International Airport, and key developments such as the opening of T-Mobile Arena in Las Vegas and the presidential debate at University of Nevada, Las Vegas, are setting up to bring another record year for the Nevada tourism industry.

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December 2015

The recent announcement that electric auto maker Faraday Future would build its $1 billion manufacturing plan in North Las Vegas marked another milestone for Nevada’s economic development strategy. The Faraday Future agreement was reached about a year after a similar agreement with electric car maker Tesla Motors, which is building a $5-billion battery manufacturing plant near Reno. Combined, Tesla and Faraday Future are expected to create 11,000 new permanent jobs once their plants are built and fully operational.

These announcements, which put Nevada at the heart of electric car manufacturing, have been the most high-profile achievements in the state’s recent efforts to diversify the economy. The seeds of those efforts were planted amid the fallout from the Great Recession, when Nevada was recovering from a nation-leading unemployment rate of 14.0 percent and large job losses in key sectors, including construction and leisure and hospitality. Although heavy concentration in these sectors enabled the state to experience significant growth over multiple decades, that same concentration made it susceptible to extreme volatility triggered by the housing bubble and recession.

This concentration is illustrated by state employment data. In 2007, the leisure and hospitality and construction sectors supported a combined 41.8 percent of all the jobs in Nevada, more than twice the national average of 18.3 percent. At the same time, employment shares in other sectors were significantly underrepresented, including manufacturing (4.5 percent vs. 12.1 percent nationally), information (1.4 percent vs. 2.7 percent nationally), and education and health services (8.1 percent vs. 15.3 percent nationally).

Recognizing the need for a more diverse and stable economy, Governor Brian Sandoval and the state Legislature in 2011 realigned economic development organizations, created new state programs, and targeted key industries for growth. These targeted industries included areas where Nevada lagged, such as healthcare and manufacturing, as well as areas of strength, such as mining, gaming and tourism.

Since then Nevada’s economy has rebounded on many fronts. The unemployment rate remains one of the highest in the nation, but recent statewide job growth has been at or near nation-leading levels. Private-sector employment climbed 8.8 percent between 2011 and 2014, led by strong growth in leisure and hospitality (20,241 jobs), trade, transportation, and utilities (17,757 jobs), professional and business services (16,401 jobs), and construction (11,094 jobs). Among those, construction reported the highest job growth for the period at 21.3 percent, while professional and business services grew the second-fastest at 11.7 percent.

Employment in several key targeted industries also experienced strong growth during that timeframe, including manufacturing (8.6 percent), health care and social assistance (9.2 percent), transportation and warehousing (12.7 percent), and information (9.3 percent). In addition, since 2012 businesses in targeted growth industries have begun relocations or expansions that will create more than 35,000 jobs and more than $12 billion in investment in Nevada. More than half of those jobs are in manufacturing and information technology ecosystems.

Despite those successes, results have been mixed when it comes to creating a more diverse economic base. These results can be illustrated using location quotients, which compare Nevada’s shares of industry employment to national rates. For example, a location quotient of 2.0 would indicate that a state’s employment share in that industry was twice the national average. Between 2007 and 2014, Nevada’s location quotients for leisure and hospitality employment dropped from 2.56 to 2.51, while construction fell significantly from 1.78 to 1.13, indicating a reduced reliance on those industries. A number of sectors markedly improved their location quotients, including health care and social assistance (0.57 to 0.63), transportation and warehousing (1.13 to 1.30), and educational services (0.31 to 0.42). Others reported little or no growth, including manufacturing, information, professional and business services.

These results underscore the reality that economies don’t remake themselves overnight. Economic diversification requires consistent effort and commitment over an extended period of time. Nevada has achieved much success in just a few short years, including the high-profile victories of Tesla and Faraday Future, and is on its way to a more balanced economy that can better weather the ups and downs that will come during economic downturns in the future.

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November 2015

When Nevada’s population and economy boom, the construction industry booms along with them. This trend was especially evident in the mid-2000s, as the industry quickly expanded to build new homes, shopping centers, and office complexes to keep up with the Silver State’s fast-growing population. Yet the arrival of the Great Recession and subsequent years of economic downturn slowed population growth to a trickle, pushed unemployment levels to a nationwide worst, and crippled demand for new building. The construction industry suffered more than most during this time. However, since bottoming out in early 2012, the construction sector has reported the fastest-growing employment in a state that once again ranks near the top in population and job growth.

The connection between construction employment and overall job trends in Nevada extends back at least 20 years. In the mid-1990s, the share of construction jobs reached 8 percent of all jobs in the state, a level that remained relatively steady for the following decade as average annual population growth climbed over 4 percent. In January 1994, 50,200 people were employed in Nevada’s construction industry. That number more than doubled over the next 10 years, reaching 102,800 in January 2004. During the following 30 months, the construction sector added nearly as many jobs (46,000) as in the previous decade (52,600). At its peak in June 2006, construction accounted for 148,800 jobs, or about 11 of every 100 jobs in the state.

Construction employment during this period was fueled in large part by new home building. Between January 2004 and June 2006, Clark and Washoe counties issued a combined average of 3,748 new home permits per month, the equivalent of nearly 45,000 new homes per year. Although the Great Recession was still more than a year away, in summer 2006 new home building began to slow and construction employment started to shrink in a sign of what was to come.

The gradual slowdown quickly became a freefall as the nation plunged into recession and the housing market collapsed. By January 2012, Nevada’s construction employment had fallen to a low point of 47,600 jobs, giving back all the jobs the industry had gained since 1994. Home construction fell even further, as the industry in Clark and Washoe counties was adding just about 5,500 houses a year in early 2012, the lowest in more than three decades and a fraction of the 49,206 homes built in the 12 months through May 2006.

The state’s economic troubles touched all industries, but no key sector was hit as hard as construction. Between peak statewide employment in May 2007 and the post-recession valley in January 2012, the construction sector lost 89,500 jobs, a drop of 65.1 percent. For comparison, the leisure and hospitality sector shrank by 32,600 jobs (-9.5 percent), the professional and business services sector declined by 15,900 jobs (-9.9 percent), and retail trade fell by 8,400 jobs (-6.1 percent) during the same period.

Since early 2012, Nevada’s economy has rebounded across the board, and the state is again reporting near nation-leading growth in population and employment. The construction industry has played a key role in that rebound. New home permitting in Clark and Washoe counties has reported 43 consecutive months of growth in rolling 12-month totals, and 39 of those months recorded double-digit growth rates over the previous year. Construction employment has rebounded in stride, adding 24,000 jobs between January 2012 and September 2015, a 50 percent growth rate over the period. That growth far surpasses the rates of other key sectors. Leisure and hospitality grew by 16.1 percent (49,700 jobs), professional and business services grew by 12.7 percent (18,400 jobs), and retail traded expanded by 5.4 percent (7,000 jobs) during that time period. In the past year, construction employment growth (8.6 percent) has more than doubled employment growth in most key sectors and the overall statewide employment growth rate of 3.3 percent. Despite those gains, construction employment (72,000) remains at half of peak levels, while other key sectors have regained all or most of the jobs lost since the peak. The construction sector might not reach those peak employment levels for some time, but its strong recent growth suggests a stabilizing industry that is benefitting once again from rising population and increasing job opportunities across the Nevada economy as a whole.

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October 2015

For most of the year, the Federal Reserve Board has signaled that a rise in interest rates was forthcoming as the United States jobless rate fell to the lowest levels since 2008. However, those signals have yet to materialize into action, and the board’s September meeting passed with interest rates remaining at historically low levels. That doesn’t mean an interest rate hike isn’t on the horizon. Federal Reserve Chairwoman Janet Yellen has not ruled out raising rates before the end of the year, though other board members have publicly questioned whether such a move would be premature amid the uncertainty about the national economy’s health. Yet the question on interest rates isn’t if, but when, they will be raised and what that will mean for the economy across the country, including Nevada.

The Fed hasn’t raised interest rates since the economy was soaring in 2006. It slashed rates in the middle of the Great Recession to loosen credit markets, encourage borrowing, and stimulate the economy. The low interest rate environment has helped the nation’s economic recovery, but some at the Fed worry price inflation could take hold if interest rates don’t rise soon. Opponents of an imminent rate hike argue that although unemployment is the lowest since before the recession, wages have stagnated and annual inflation remains well below the target of 2.0 percent.

Uncertainty about the national economy might push an interest rate change into 2016, but when a rate increase does come, it holds ramifications for a Nevada economy that has outperformed recent national trends on many key indicators. Chief among them has been employment growth. Year-over-year job growth in the Silver State has outpaced the U.S. for 38 consecutive months. In August 2015, employment in Nevada grew by 3.0 percent over the previous year, compared to a 2.0 percent rate for the nation. Average hourly wages have spiked in Nevada as well, climbing 5.9 percent in August 2015 over the prior year, nearly tripling the 2.2 percent growth at the national level during that same timeframe.

Underlying Nevada’s positive employment trend has been strong growth in taxable retail sales, an indicator of consumer spending and overall economic health. Retail sales in the state reached a record $50.7 billion in 12 months through July 2015 thanks to consistently strong year-over-year 12-month growth rates that have remained above 6 percent in six of seven months this year. For comparison, the year-over-year growth rate for U.S. retail sales declined from a recent high of 4.0 percent in January 2015 to 3.1 percent in July 2015.

Low interest rates play an important role in spurring consumer spending, particularly when it comes to big-ticket items such as vehicles, appliances and other durable goods. In Nevada, retail sales at motor vehicle and parts dealers for the 12 months ending in July 2015 rose to $5.9 billion, a 10.5 percent growth rate over the prior year that nearly doubled the national rate of 5.8 percent during the same timeframe. Meanwhile, year-over-year 12-month sales of durable goods at merchant wholesalers in Nevada increased by 7.9 percent to $3.4 billion in July 2015. By comparison, national sales of durable goods climbed 3.6 percent during the same period. An interest rate raise by the Federal Reserve could trigger a slowdown of retail sales growth in Nevada and move state trends closer to national levels.

Perhaps the greatest impact of higher borrowing rates will be felt in the state’s housing market. The market has recently stabilized after years of volatility that included the Great Recession collapse and the subsequent investor-fueled recovery. Median sale prices of both new and existing homes continue to rise in Clark and Washoe counties, though that could be attributable to a short supply of houses on the market. For example, the southern Nevada housing market has less than a three-month supply of homes for sale. A normal market would have a six-month supply. Overall home sales activity in Clark and Washoe counties has remained largely stagnant for most of the year, with year-over-year trailing 12-month sales totals declining for 34 consecutive months through July 2015. That trend is unlikely to reverse course when interest rates rise, which would only put the American Dream of home ownership beyond the reach of more Nevadans.

These trends will be closely watched in the months following any interest rate hike, though for now it appears that a change won’t come until the calendar flips to 2016.

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September 2015

In the United States, consumer spending on goods and services accounts for two-thirds of the economy. With such a large – and growing – share of the national economy, consumer activity provides an important gauge to measure the overall economic health of the country. Consumer spending is constantly influenced by a complex mix of fluctuations in employment, wages, interest rates, housing prices, consumer confidence, the ability to borrow money, tax rates, personal feelings held by consumers, and other factors in the economy.

In Nevada, consumer spending is reflected in taxable retail sales volumes, which have been on the upswing as several economic indicators continue to report positive trends through June 2015. Taxable retail sales in Nevada have consistently grown since June 2010 when 12-month totals bottomed out at $37.8 billion. Total taxable retail sales surpassed their March 2007 historical high of $49.6 billion in March 2015, and they have continued to post new highs in each of the following months. Through June 2015, statewide taxable sales stood at a record-high of $50.3 billion over the previous 12 months. Additionally, trailing 12-month figures have rebounded 33.3 percent from the June 2010 low point.

Changes in taxable retail sales volumes for Nevada are influenced mostly by activities within Clark County, where trailing 12-month taxable sales climbed to nearly $37.5 billion in June 2015, a 34.2 percent rebound from the recession-low of $27.9 billion in March 2010. Nearly every significant spending category reported gains in trailing 12-month retail sales over the past year. Food services and drinking places (+4.8 percent), motor vehicle and parts dealers (+9.1 percent), merchant wholesalers, durable goods (+11.1 percent) and building materials and garden equipment and supplies (+10.7 percent) were among the best performing categories in the current period.

Another positive economic trend has been the number of private businesses in Nevada, which has grown consistently in each month since July 2011. By the end of the first quarter of 2015, Nevada surpassed its pre-recession high of 76,234 businesses by reporting a record total of 76,413 businesses, many of them retail establishments where consumers can shop and eat. Not surprisingly, 68.9 percent of private businesses were in Clark County, 18.2 percent were in Washoe County, and the remaining 12.9 percent were located in rural counties.

Positive trends in employment and average weekly wages have significant effects on consumer spending as they put more disposable income in the pockets of consumers. Trailing 12-month employment totals for Nevada have remained positive in every period since September 2011. Although total employment of 1.25 million in July 2015 still trails the pre-recession high of 1.30 million, it is on track to exceed that mark within the next six to 12 months. Statewide employment in July 2015 stood 13.6 percent higher than the recession low of 1.1 million in January 2010. Despite employment growth that is among the best in the nation, Nevada’s unemployment rate remains near the bottom with a seasonally adjusted rate of 6.8 percent in July 2015.

Average weekly hours statewide have been relatively flat since the end of the Great Recession, remaining at or near 33.5 hours per week in every period since December 2012. However, average weekly wages have risen 6.8 percent since the same period, with a post-recession high of $733.82 reported in July 2015 (latest data available), equating to a 5.7 percent year-over-year increase.

Consumer spending and the state’s economy are expected to further improve as businesses continue to grow and Nevadans have more disposable income through more jobs, less unemployment, higher wages, and greater opportunity.

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August 2015

The unemployment rate is a closely watched indicator of economic health across the country. It dips low when times are good and can skyrocket when times are bad. This up-and-down scenario is all too familiar in Nevada. During the state’s economic boom in the first half of the 2000s, the Silver State’s unemployment rate fell as low as 3.9 percent and consistently tracked about a full percentage point better than the national rate. That trend reversed during the Great Recession. As jobless numbers swelled nationwide, Nevada’s unemployment rate caught and then surpassed the national average. At the nation-leading peak of 13.7 percent in November 2010, the state’s unemployment rate was more than four percentage points higher than the rest of the country.

As the state’s economy has recovered, that gap has closed and Nevada’s unemployment rate has dropped steadily to its lowest point since mid-2008. Up until January 2015, the unemployment rate had fallen 42 consecutive months. Yet through the first half of the year, the rate has hovered around 7.0 percent, and the 6.9 percent recorded in June ranked second-highest in the nation. This might suggest stagnation in the economic recovery after more than three years of steady improvement; however, the unemployment rate doesn’t tell the whole story of employment.

When measured by overall job growth, Nevada ranks among the best in the nation. In June, year-over-year employment grew by 3.5 percent, second behind only Utah and significantly better than national growth of 2.1 percent. In terms of raw numbers, the state added 42,400 jobs between June 2014 and June 2015, with 25,600 of them coming in the first half of 2015. In all, the state has regained 144,900 jobs since employment reached its low point in September 2010. Another year of similar job growth will push statewide employment back to the pre-recession level of 1.3 million.

The strong job growth trend so far this year, however, has had a negligible effect on the unemployment rate. The explanation lies with the growing labor force, which is the number of people who are working or actively looking for work. After the economic downturn, many Nevada workers who lost jobs stayed out of the labor force and stopped looking for new jobs, often because they believed none existed for them. Others left the state for other markets with better job prospects. As Nevada's employment picture improved, the size of the labor force grew modestly over the past five years before surging in the first half of 2015. Between January and June, the state’s labor force added 23,264 workers, the best six-month stretch since 2006. That surge in the labor force has limited the effect of recent job growth on the standard unemployment rate. The net takeaway, however, is that more jobs are available and more people are looking for work as confidence in the job market rises.

Those trends have also slowed improvement in the broader measure of employment (the U-6 rate), which includes discouraged workers who have stopped looking for jobs as well as part-time workers who would like full-time jobs. In the latest figures, the Silver State’s nation-worst U-6 unemployment rate was 15.2 percent. That result was down a full percentage point from the 16.2 percent reported a year earlier, but only slightly below the 15.3 percent reported in the two most recent quarters. Those levels are well below the peak of 23.7 percent in early 2011, yet well above the recent annual low of 6.8 percent in 2006. The numbers make clear the significant improvement in Nevada’s labor market since the economic downturn and the ground still left to make up to reach pre-recession levels. As new unemployment figures are released in coming months, remember that they tell only part of the story about the ongoing rebound in the state’s job market and
overall economy.

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July 2015

Southern Nevada has been the focus of Nevada’s economy for most of the past 50 years, but that appears to be changing. The state’s northwestern urban center – commonly known as the Reno-Sparks metropolitan statistical area (MSA) or Washoe County – has recently reported improved measures of economic performance and a number of high-profile projects, suggesting even stronger growth on the horizon may be possible.

It is easy, and accurate, to point to the $5.0 billion Tesla Gigafactory and Switch’s new $1.0 billion SuperNAP data center as evidence of northern Nevada’s economic renaissance. But there is more to it than that, and these admittedly impressive projects may very well be more the result of a fertile economic environment than the catalyst of change. Northern Nevada has all of the pro-business advantages long touted by the south, but it also has better-performing public schools, high quality of life measures and well-positioned economic assets like the 107,000-acre Tahoe-Reno Industrial Center.

Northern Nevada has quietly positioned itself to be remarkably attractive to businesses in a number of sectors. This metamorphosis was often masked by a declining tourism and gaming sector severely impacted by the national proliferation of casino gaming, particularly in northern California. Anchored by a strong university and benefitting from a more diversified economic base compared to the Las Vegas MSA, Reno has retained a greater share of its home-grown talent pool and has been more successful in attracting tech-savvy Millennials and entrepreneurial GenXers. Projects like MidTown Reno and its Startup Row, along with locally based web development success stories like Noble Studios, clearly reflect this evolution.

The underlying statistics are clearly positive. Washoe County’s population is currently 437,600, up 1.2 percent during the past 12 months. Electric meter connections reported by NV Energy suggest growth is continuing in both the single-family and multifamily segments. Moreover, new residential permits totaled 2,535 during the past 12 months, an increase of 41 percent compared to the 1,795 reported just one year ago.

The Reno-Sparks MSA unemployment rate has fallen to 6.1 percent, and employment growth in the region is a robust 3.1 percent. Northern Nevada added 6,300 jobs during the past year, with particularly strong increases in business and professional services (+1,800 jobs, +6.6 percent); leisure and hospitality (+1,700 jobs, +4.5 percent); and trade, transportation and utilities (+1,500 jobs, +3.3 percent).

Other statistics are also worth noting. The number of hours worked per employee, which has been a particularly troubling statistic for Nevada and the Reno-Sparks region, has increased 6.6 percent during the past 12 months, or from 32.0 hours per week to 34.1 hours per week. Similarly, incomes are on the rise. Average weekly earnings are up 3.5 percent year-over-year. By way of comparison, southern Nevada average weekly earnings increased by only 1.1 percent during the same period. Finally, median existing home prices have reported year-over-year increases for the past 12 quarters. They currently stand at $268,000 per unit, 17.6 percent higher than they were one year ago and nearly $100,000 higher than the price reported in the southern portion of the state.

Growth is not all roses and sunshine. Many are asking whether northern Nevada is prepared for the demand that these growth trends will place on resources and infrastructure. Clearly, they are not; but they will be. Local government officials are acutely aware of these challenges and appear ready to face them head on. Land and housing price bubbles will potentially be a problem, as will an oversubscribed talent pool. That said, compared with the problems created by an economy facing decline and even obsolescence, the challenges created by growth and prosperity should be welcomed with open arms.

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June 2015

The economic recovery in Nevada has shown few signs of slowing as many of the most important indicators have continued to demonstrate strong and steady growth in the wake of the Great Recession. In fact, many indicators are in the midst of extended positive trends that have continued for three years or more. Among them is employment, a key measure of the overall health of Nevada’s economy. Total employment climbed to 1.25 million in April 2015 (latest data available), which marked 52 consecutive months of year-to-year job growth. The sustained trend added 143,100 jobs in the Silver State, a 13.2-percent gain from the post-recession low-water mark of 1.10 million jobs reported in January 2010.

As a result of those job gains, the state’s year-over-year unemployment rate has fallen for 50 straight months, and the 7.1 percent mark in April 2015 is nearly half of the peak rate of 13.7 percent reported in November 2010. The number of private businesses in Nevada has grown along with employment. Since dipping to 69,812 in the third quarter of 2010, businesses have rebounded to 75,817 in the fourth quarter of 2014. That 8.6-percent growth included 14 straight quarters, or 42 months, of year-over-year improvement. Those trends were attributable to strong business growth in Clark County, which grew by 12.0 percent over the same time period. The 52,144 private businesses reported in the fourth quarter of 2014 were a record for Clark County. Washoe County has not experienced similar levels of business growth. It has added 502 businesses since the low point in the first quarter of 2012, but the 13,843 businesses reported at the end of 2014 fell short of the 14,484 peak posted six years earlier.

Taxable retail sales in Nevada have shown consistent growth during the recovery since the 12-month total reached a low of $37.8 billion in June 2010. Since then the trailing 12-month total increased by 31.7 percent to an all-time high of $49.8 billion in March 2015 (latest reporting period). That stretch has included 52 straight months of year-to-year improvement. Clark and Washoe counties each reported similar trends in both overall retail sales growth and the number of consecutive months of year-over-year growth.

Nevada’s housing industry has experienced several streaks of its own along with the statewide economic revival. Home prices, as measured by the housing price index, have climbed for 13 straight quarters, and the latest home price index of 183.56 in the first quarter of 2015 is the highest mark since 2008. Since 2012, the Silver State has consistently led the nation in year-to-year home price appreciation. The newest figure put Nevada second behind Colorado and continued a 10-quarter streak with either a first- or second-place ranking. Since hitting the low point of 111.38 in the fourth quarter of 2011, Nevada’s home price index has grown by a nation-leading 64.8 percent, well above California’s 48.1-percent mark.

The sustained growth of these and other key indicators has been a welcome sign of Nevada’s steady recovery following the Great Recession, and their continued improvement will go hand in hand with the ongoing betterment of the state’s economic well-being.

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May 2015

Like many economic indicators, business growth in Nevada has shown mixed signs as the Silver State’s economy has transitioned from recession to recovery. Statewide, the number of private businesses fell fast during the Great Recession, dropping by 6,422 businesses between the high point in the fourth quarter of 2008 and the bottom in the third quarter of 2010. Since losing 8.4 percent of its businesses in less than two years, Nevada has gradually regained most of those numbers over the ensuing four years. According to the latest figures, Nevada reported 74,931 private businesses in the third quarter of 2014, the highest number since mid-2007. That represents a gain of 5,119 businesses (+7.3 percent) since the 2010 low point.

The vast majority of Nevada’s business growth has come in Clark County, which accounted for 94.5 percent of net business growth statewide. Southern Nevada added 4,838 businesses (+10.4 percent) since bottoming out in July 2010. That improvement pushed the business count in Clark County to an all-time high of 51,402 in Q3 2014 (latest data available). That figure was 1.5 percent higher than the 2008 peak of 50,633 businesses.

Although Clark County set a record, Nevada’s overall figures remained below the peak levels reached early in the Great Recession. The 74,931 private businesses recorded statewide in the third quarter of 2014 were 1,303 (-1.7 percent) below the 76,234 establishments in the third quarter of 2008. More than half of that gap comes from Washoe County, which has not seen southern Nevada’s level of business growth during the recovery. Since the 2010 low point, the number of Washoe County businesses has grown 2.4 percent, which is four times slower than the growth in Clark County. That modest growth pushed the number of Washoe County businesses up to 13,723 in last year’s third quarter, but that figure was still down 761 (-5.3 percent) from the peak of 14,484 set in the third quarter of 2008.

Statewide, businesses with fewer than 50 employees comprise nearly 96 percent of all businesses, so it is little surprise that small businesses have accounted for the majority of the growth. Between the first quarters of 2010 and 2014, small business counts grew by 1,499 establishments, or 82.0 percent of the overall business gains. Companies with more than 50 workers grew by 327 establishments. (Note: These figures vary from the total quarterly business counts because of limited data on businesses by size.) Small business growth during that timeframe measured 2.2 percent compared to 12.0 percent for larger companies.

That difference in growth rate was mirrored in employment by small companies versus their larger counterparts. Small business employment climbed 2.9 percent between 2010 and 2014 compared to 11.9 percent for companies with 50 employees or more. That growth pushed employment in larger companies to 58.9 percent of Nevada’s private workforce, up from a low of 56.1 percent in 2012, according the U.S. Bureau of Labor Statistics. Conversely, the share of Nevada employees working in small businesses fell from 43.9 percent to 41.1 percent during that period. At the county level, small business employment levels varied significantly. In Clark County, small businesses employed 38.1 percent of the workforce in the first quarter of 2014, while in Washoe County, they employed 49.8 percent of workers.

The professional and business services sector added 2,044 establishments in Nevada between 2010 and 2014, the largest gain of any sector. The majority of those establishments (2,000), employed fewer than 50 workers. Other sectors that showed strong business growth, including education and health services; trade, transportation and utilities; leisure and hospitality; and information, also reported the largest gains among businesses with fewer than 50 workers.

Small businesses will continue to play a significant role in generating jobs and economic activity as Nevada continues its economic recovery.

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April 2015

Nevada’s all-important housing industry had enjoyed a significant rebound following the Great Recession. Though, for many industry indicators the only way to go was up after bottoming out. On one key metric, the housing price index, Nevada saw some of the best performances in the nation since the economic downturn. In the latest data released for the fourth quarter of 2014, Nevada’s housing price index was up 9.0 percent over the previous year, ranking first among the states. The Silver State’s five-year growth rate of 31.1 percent ranked second, behind only fracking boom state North Dakota. However, after a long period of strong growth, some housing market metrics are cooling down. These do not appear to be signs of a market collapse, but rather stabilization. They are likely also being influenced by other wider economic factors, such as Nevada’s still high unemployment rate and tighter credit markets that make it more difficult for some to buy a home.

In southern Nevada, investors fueled much of the existing home sales in the post-recession years as they snapped up bargain-priced houses stuck in foreclosure or as short sales. Cash buyers accounted for more than half of existing home sales for all 2012 and into mid-2013. But once median resale home prices topped $150,000, cash buyers started pulling out of the market and now account for just a third of existing home sales in the Las Vegas area.

The lack of investor activity has had a noticeable effect on the resale home market. Trailing 12-month totals for existing home sales have tumbled for 30 straight months, and in each of the past six months the drops have been by double-digit percentages. Resale home closings for the 12 months ending in January (41,947) were the lowest since May 2009 and down 29.4 percent from the most-recent peak of 59,400 closings in March 2012.

The sales slowdown is evident in southern Nevada’s median sales prices of existing homes. The monthly median existing home price in January fell to $170,000, down slightly from $172,580 in December 2014. The 12-month average median price was up 7.3 percent from January 2014, but that represents the lowest year-over-year price increase since mid-2012. The drop in existing home sales has helped increase the available homes on the market to a little more than a four-month supply. This is up about from the three-month supply of a year ago but still well below the six-month supply that is considered normal.

In southern Nevada’s new home market, sales were down 13.0 percent for the 12 months ending in January (6,063). That marked the eighth consecutive month of double-digit drops in the growth rate. The recent downward trend was in stark contrast to the growth seen during 2013, when trailing 12-month growth rates remained between 40 and 70 percent for most of the year. Despite the sales slowdown, the monthly home median sales price climbed to a seven-year high of $316,616 in January. That figure was up 3.8 percent from a year earlier. The average 12-month price ($292,862) also reached highs not seen since the Great Recession. However, January’s 12-month year-over-year growth rate of 9.7 percent was the first single-digit rate since May 2013.

Northern Nevada’s housing market experienced a similar slowdown in existing home sales, with the monthly figure in December 2014 (434) falling 19.0 percent from a year earlier. Washoe County’s existing home market hadn’t seen a double-digit drop, let alone one approaching 20 percent, in six years. The trailing 12-month total in December (6,329) was more stable but still down 5.5 percent from 2013. Despite the sales slowdown, median resale home value in Washoe County saw strong gains, reaching a monthly level of $250,000 in December 2014. That was up 13.6 percent from a year earlier and the highest monthly level since July 2008. The average 12-month median resale price for the period was $234,654, up 13.6 percent over 2013, but it was the lowest 12-month price increase since February 2013 and well below the more than 20-percent growth seen between mid-2013 and mid-2014.

New home prices in northern Nevada have shown steady growth since early 2013, with 21 straight months of double-digit growth in the year-to-year trailing 12-month median sales price. In December 2014, the trailing 12-month average new home sales price reached $328,967, down a fraction from a month earlier but up 12.0 percent from the year before. That mark was the lowest since June 2013 and well below the 18-percent growth rates seen through most of 2014. As Nevada’s improving economy brings new jobs and new residents, the housing market should stabilize and establish a steady, if at times uneven, growth trend into the future.

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March 2015

Nevada’s ongoing economic recovery was again evident in the year-end employment picture, which followed up a good 2013 with an even stronger 2014. The state saw across-the-board job gains in nearly every sector, including double-digit growth in the key construction industry.

Overall, the state added 41,000 jobs last year, a 3.5-percent climb that brought total employment to 1.2 million jobs. Those numbers were up slightly from previous estimates, which were recently adjusted by the U.S. Labor Department using unemployment insurance reports submitted quarterly by employers. While the adjustment added 600 jobs for Nevada in 2014, the revised numbers bumped the annual average unemployment rate from 7.7 percent to 7.8 percent. Even with the slight raise, the unemployment rate was 1.7 percentage points lower than the 9.5 percent set in 2013.

Job growth in southern Nevada last year was even better than the statewide figures, with total jobs in the Las Vegas area growing 3.9 percent to 883,300. The additional 33,500 jobs accounted for eight of every 10 new positions in the Silver State. Job growth in the Reno area came in below the state’s rate, rising 3.2 percent. The additional 6,300 jobs pushed total employment for the region to 202,200.

Statewide, the vast majority of new jobs (39,700) were in the private sector, while the government sector accounted for 1,300 additional positions. Private-sector job growth was reported in all but a few industries. The state’s leading employment sector, leisure and hospitality, led the way with a gain of 12,800, a 4.0-percent year-to-year improvement that brought total sector employment to 336,700. Most of that growth came from the 11,800 new positions within accommodation and food services, which is a good sign for Nevada’s all-important tourism industry. Another key state industry, construction, set the pace in job growth rate with a significant 10.6-percent improvement in employment numbers. The additional 6,000 positions raised construction employment to 62,800, the highest level since 2010.

The professional and business services industry saw the largest downward adjustment as a result of the employment benchmark revisions but still added 5,700 jobs in 2014. The 3.8-percent growth raised the sector’s total employment to 155,700, making it the third-largest employment sector in Nevada. The trade, transportation and utilities sector, the state’s second-largest employment sector, grew 3.6 percent with the addition of 8,100 jobs. The retail trade subsector accounted for 4,000 of those jobs with a 3.0-percent growth rate, while the transportation, warehousing and utilities subsector grew 5.6 percent, a gain of 3,000 positions.

Employment growth was also strong in the education and health services sector, which climbed 4.1 percent with the addition of 4,600 positions. The health care and social assistance subsector grew 3.8 percent by adding 3,800 jobs, bringing the subsector’s total employment to 103,200, while the educational services subsector enjoyed a strong 6.6-percent job growth rate with 800 new positions. Meanwhile, the manufacturing industry added 1,100 jobs, a 2.7-percent improvement over 2013, and financial activities employment grew a modest 0.7 percent with 400 new jobs. Within the sector, the finance and insurance industry lost 300 positions, which was countered by the addition of 700 jobs in the real estate and rental and leasing subsector. Mining was the only sector to lose jobs in 2014, dropping by 900 positions (-5.9 percent).

Growing statewide employment was reflected in the rising number of employers in Nevada. The number of employers reached a record high in the fourth quarter of last year, climbing to 61,200. That topped the previous record of 60,600 employers set in the second quarter of 2008. The late-year surge brought the annual average to 60,200, an improvement of about 7 percent from the 2011 post-recession low point, according to the Nevada Department of Employment, Training and Rehabilitation. Before the Great Recession, the number of employers had risen every year for at least a decade.

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February 2015

In the years since the Great Recession, Nevada’s year-end economic prognosis was usually a mixed bag. As the state gradually rebuilt from the economic rubble, any positive signs of improvement tended to get overshadowed by negative overall trends. That changed in 2014 as the state economy finally showed across-the-board gains and transitioned from a period of recovery to one of stability and growth. That transition was evident in the many economic vital signs that not only grew in 2014 but actually reached or approached pre-recession levels.

Historically, the hallmark of Nevada’s economic strength was evident in its population growth. Year after year, the Silver State sat atop the list of fastest-growing states as people voted with their feet in search of economic opportunity. In the wake of the recession, population growth slowed and even reversed as the state lost residents. Yet in 2014, Nevada was back in familiar territory near the top of nationwide population growth rankings. Its 1.7-percent growth rate was second only to North Dakota, which has topped the list three years running thanks to its oil fracking boom.

Many of those new Nevada residents were drawn to the state’s improving job market, which has experienced several years of steady growth and falling unemployment. The statewide monthly joblessness rate closed 2014 at 6.8 percent, the lowest since June 2008. The improving unemployment rate could taper off as the long-term unemployed reenter the workforce amid improving job prospects, but more people looking for work would be another sign of a healthier economy, even if that temporarily moves the unemployment rate in the wrong direction.

Even with the improving job market, however, overall hours worked in non-government sectors remained flat, closing the year at 33.4 hours a week, well below the pre-recession peak of 37.6 hours. In contrast, weekly wages for private industry workers grew 3.5 percent throughout the year, reaching an average of nearly $712 in December, the highest level since early 2009.

Nevadans closed 2014 with more good news for their wallets as the average price of a gallon of regular gasoline tumbled about a $1.00 from a year earlier. Analysts expect prices to rise steadily this year but still remain cheaper than in 2014, saving the typical American household $750 over the year. The combination of more workers earning more money and spending less on gasoline appears to have primed consumer spending, especially in Clark County. Taxable retail sales in southern Nevada for the 12 months through November 2014 climbed to $36.2 billion, up 8.1 percent over the previous year and closing in on the 12-month high set in early 2007.

Nevada’s housing market also showed strong post-recession signs in 2014, topping the nation with a 10.35-percent one-year home price appreciation through September 2014, the latest date available. That number was more than 2 percentage points higher than in the second-ranked state, Hawaii. The price surge has helped bring underwater homes to the surface, dropping the statewide percentage from 32.2 percent to 25.4 percent. Foreclosures also showed improvement, with default notices in Clark County closing the year down 89.3 percent from their December 2009 peak and nearing pre-recession levels. Home building continued to rebound in 2014, with new home permits in Clark County rising 9.6 percent year over year. The 9,506 permits issued in the 12 months through November was the highest number since May 2009.

Despite the overall improvement in 2014, some economic indicators still lagged. Statewide gaming revenue has been stagnant, ending the year down 1.1 percent, and Las Vegas convention attendance grew a modest 0.9 percent. The 5.2 million conventioneers in 2014 remains more than a million people short of the pre-recession peak. Those sluggish figures are countered, however, by strong growth in visitor volume, including the record 41.1 million people who visited Las Vegas in 2014.

With the foundation of recovery set in 2014, 2015 is positioned to see continued economic growth and stability as the Great Recession becomes a more-distant memory.

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January 2015

Las Vegas tourism officials expected 2014 to be a record-breaking year, but it turns out the Las Vegas Convention and Visitors Authority’s projection for an all-time high of 40 million visitors was not high enough. The agency revealed this month that the final number is expected to be 41.1 million visitors for 2014, a big jump from 2013. The strong visitor numbers are another sign of the post-recession recovery for Las Vegas and Nevada, which are starting to feel the ripple effect of the improving economy across the United States. The rising tide of visitors is apparent in the money flowing to resort properties throughout the state, especially those in southern Nevada.

According to the recently released Nevada Gaming Abstract, total revenue for the state’s casinos grew 3.6 percent to $23.9 billion in the fiscal year that ended June 30, 2014. Much of that growth was fueled by hotel room revenue climbing $357.5 million statewide, a 7.5 percent improvement thanks in part to an uptick in occupancy rate. Gaming revenue rose by $245.5 million, or 2.4 percent, but lost ground in its share of overall revenue compared to non-gaming revenue, dropping slightly from 45.1 percent to 44.5 percent.

The statewide trends were greatly influenced by Clark County, which accounts for about 90 percent of all casino revenue in Nevada. Overall revenue for the county’s casinos climbed $813.8 million, or 4.0 percent. A significant share of that growth came from an 8.0 percent climb in room revenue.

Casinos on the Las Vegas Strip saw even more growth, with overall revenue rising $769.2 million, a 5.0 percent increase. Like the rest of the state, a significant portion of that growth was driven by rising room revenue, which went up by $322.4 million (+8.2 percent) as the occupancy rate inched up to 90.4 percent. Gaming revenue for Strip casinos was up 4.2 percent but dipped slightly as the share of overall revenue (37.0 percent to 36.8 percent). Room revenue remained the second-largest category at 26.1 percent of all revenue.

Casinos in downtown Las Vegas rely more heavily on gaming revenue, which accounted for 52.0 percent of the $977.0 million in overall revenue. However, the 3.8-percent growth in revenue was barely helped by gaming, which went up a mere 0.5 percent. Downtown Las Vegas’ revenue growth was spurred by a 12.3-percent growth in room revenue and an 11.1-percent bump in beverage revenue. Together, they enjoyed $27.9 million in additional revenue, which accounted for the majority of overall revenue growth. Downtown casinos enjoyed a significant boost in occupancy rate, which climbed from 81.4 percent to 85.0 percent. That improvement was four times better than the occupancy rates statewide and in Clark County.

Casinos in Washoe County did not see the same success as their southern counterparts, with overall revenue climbing only 2.5 percent. The highest growth category was food revenue, at 5.2 percent.

The positive tourism trends are also evident at McCarran International Airport. Through November, passenger counts were up 2.5 percent in 2014. Most of that growth was through a steady rise in domestic flights, but international passengers saw a significant gain of nearly 13 percent.

As strong as 2014 was for the state’s gaming and tourism metrics, officials are predicting an even better year for 2015 thanks to the healthier national economy and increased flight capacity at McCarran. In fact, the Las Vegas Convention and Visitors Authority is already projecting 41.6 million visitors for 2015, which would make it another record year for Las Vegas tourism.

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December 2014

Nevada’s economy beat expectations in 2014 and appears primed for continued growth in the coming year. Improved metrics in productivity, employment and income suggest the state has moved well beyond post-recession recovery and is settling into a pattern of sustained growth. Record visitor volume in the south, the recent announcement that Tesla will build its highly anticipated giga-factory in the north and nation-leading housing price appreciation statewide provide further evidence that the economy’s growth trend should extend well into 2015.

Nevada’s economy expanded at roughly 2.4 percent during 2013 (latest data available). While this pace of expansion was not as high as some observers had hoped, it is accompanied by a 2.4-percent increase in employment through October 2014 – 10th highest rate in the nation – as well the nation’s fastest decline in unemployment. Additionally, between the first and second quarters of 2014, Nevada’s aggregate personal income grew by 1.5 percent. This pace of income growth is nearly double the rate reported in the second quarter of 2013 and was the second-fastest rate reported in the far west states during Q2 2014 (Oregon was number one with a growth rate of 1.7 percent). Also worth noting, nearly every sector of the state’s economy contributed to the expansion, with strong gains in the business and professional services sector.

Significant developments in the southern and northern portions of the state suggest these trends will continue in 2015. In the south, Las Vegas visitor volume appears poised to break the 41 million trip mark for the first time in history by year’s end. Additionally, the convention calendar is particularly strong in 2015, Genting’s $4.0-billion plus Resorts World casino-hotel project is scheduled to commence construction in Q1 2015, the MGM/AEG arena development is now well underway and the Electric Daisy Carnival reported selling out its 2015 event in record time. In the north, the Tesla announcement has provided renewed optimism as the regional economy gears up for a $6 billion, 50 gigawatt-hour factory powered primarily with its own solar and wind power plants. In a class of its own, Tesla’s giga-factory could add as much as 7 percent to the region’s gross metropolitan product in 2015.

Importantly, improved economic metrics are also translating into higher property values. In its Q3 2014 report, the Federal Housing Finance Agency noted, “The seasonally adjusted, purchase-only [Housing Price Index] rose in 40 states during the third quarter of 2014. The top five states in annual appreciation: 1) Nevada 2) Hawaii 3) California 4) North Dakota 5) Florida.” [emphasis added] Going from worst to first in this key metric has helped bolster consumer spending activity. Nevada’s taxable retail sales volumes are up more than 8.0 percent in both Clark and Washoe counties. Combined with lower prices for gasoline, which some economists believe could save a typical household $750 per year, consumer confidence and consumer spending should be strong entering the New Year.

It was not that long ago that Nevada was held up as the state most affected by the Great Recession. Today, the tone and tenor of the economic discourse has clearly changed. More important than positive economic metrics, both consumers and businesses appear to have a renewed confidence relative to where the state is heading and are making plans for stability, growth and new opportunities in 2015.

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November 2014

While Nevada's residents and visitors have faced rising household expenses in any number of areas, many find themselves with some positive factors impacting their financial situation. Declining fuel prices and rising wages have helped offset some of the broader increases in the cost of living. Nevada’s visitors find themselves in a better financial position as national wages are beginning to improve with the reduced slack in the labor market. Some of the slack is even beginning to pick up in Nevada, where wage growth has managed to outpace the rest of the country. Overall, consumer wallets across the state are positioned for improvement and potentially ready to boost the Nevada economy.

Gasoline prices in Nevada have fallen $0.316 per gallon to an average of $3.093 over the past month, and across the country, gasoline prices have experienced a $0.285 per gallon decline during the same timeframe. The drop in gasoline prices comes as supply from Saudi Arabia, Iraq, and Libya increased. The underlying supply boosts from these countries are not likely to end quickly, which could allow oil prices to remain low for the foreseeable future.

In Nevada, this means that the 1.1 billion gallons of fuel purchased last year will leave residents and visitors with an additional $347.5 million to spend over the coming year, assuming $0.316 per gallon savings continue. Assuming gains are realized, this money will remain in Nevada's economy; further stimulating consumer demand in the area. The amount of money added to the local economy would be the equivalent of cutting federal taxes leaving the state by 3.4 percent. Furthermore, transportation costs that may have proven too burdensome for potential visitors will be eased with the lower fuel prices, potentially leading to higher visitor counts as well.

Across the country, wages are beginning to increase as slack in the labor market is starting to clear up. The national rate of unemployment dipped to 5.9 percent in October. In some sectors, recruiting workers is becoming more difficult, leading to higher wages being offered. In Nevada, even though employment growth has been robust, there is still slack in selected labor sectors. Unemployment remains elevated at 7.3 percent in the state, far higher than what would be considered the natural rate, but the market posted a 2.3-percentage point decrease over the past year. In spite of the excess supply of labor in the state, private employers found the need to raise average hourly wages 2.8 percent during the past year--higher than both the national increase in wages (2.0 percent) and the increase in the consumer price index (1.7 percent) during the same time. As slack in the labor market continues to clear, wages could rise faster in the state as a result.

Consumers across the country are enjoying improvements in their wallets -- albeit modest -- from lower gas prices and larger paychecks. The gains may further support growth in overall consumer spending, and Nevada’s economy is expected to benefit from recent market dynamics.

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October 2014

In a speech to business leaders from Las Vegas as well as across the Western region, the president of the San Francisco Branch of the Federal Reserve, John C. Williams, outlined his vision for the near future in terms of monetary policy. He reiterated that the Federal Reserve’s massive asset purchase program, known as quantitative easing (QE), is likely to soon come to an end. QE was an extraordinary and untested monetary policy, meant to inject funds into the economy after more traditional monetary policy options had been exhausted. As the nation’s economy continues to recover from the worst economic recession since the Great Depression, the Federal Reserve is now scaling back the extraordinary policies put in place to keep the nation’s economy afloat. Rising interest rates, providing the economy continues to grow, seem a likely next step in 2015. That said, as Mr. Williams put it, these actions should be “data-driven”, not “date-driven”, so the timing remains far from certain.

The discussion over higher interest rates comes in response to stronger economic growth and falling rates of unemployment. Gross domestic product at the end of the second quarter of 2014 grew 4.3 percent over the previous year; in real or inflation-adjusted terms, it increased 2.6 percent. Perhaps the most significant, although statistically imperfect, signal of recovery is the unemployment rate, which reached 5.7 percent in September, 1.3 percentage points below a year ago and the lowest rate reported since June 2008. Meanwhile, the inflation rate has remained at or below the targeted 2.0 percent annual rate since 2012.

There is some concern that the tide is changing. As the supply of labor tightens, employers may decide to raise wages to attract in-demand employees. Such wage inflation may in turn drive prices higher. Tighter monetary policy from the Federal Reserve would be expected to counter this trend; the problem is the timing has to be fairly exact. Too soon, and the central bank risks creating an economic downturn as companies just getting back on their feet have a more difficult time funding expansion plans and hire fewer workers; too late, and rising prices could lead to another asset bubble.

If the nation looked like Nevada, it is likely that the Federal Reserve might delay actions for a longer period. Though the state’s recovery in the past year has been significant, Nevada’s unemployment rate remains at 7.6 percent, a 2.2 percentage point improvement from a year ago, housing prices remain 38.8 percent below the peak and the state’s largest hotel casinos reported a net loss of $1.3 billion in 2013. Unfortunately, decisions at the Federal Reserve tend to be made for the national average, which means that the tighter monetary policy may have some negative ramifications due to coming too soon for Nevada, if our economy continues to lag. That said, Nevada’s economy is highly dependent on national and international visitation, particularly from California, which seems ripe for expected tapering of QE and subsequent increases in interest rates.

Notably, low cost of capital is driving many of the projects currently planned, proposed or underway in the state and higher interest rates run the risk of negatively impacting some. Large projects already in the beginning stages, including Tesla in Storey County, Genting Resorts World in Las Vegas, Union Village in Henderson, the Global Business District, and a host of others already far along in the development process, will likely continue to move forward. We anticipate that the low interest rate environment produced by the Federal Reserve’s actions will remain long enough for these projects to benefit. However, those coming up behind them will almost certainly face higher capital costs.

The future is, of course, uncertain. Mr. Williams and his colleagues have taken extraordinary measures to ensure the US economy regains stable footing. The main risk of such actions – inflation – remains very much in check. Rising interest rates will be viewed as a negative by some, but they will be in response to sustained higher rates of economic growth and lower rates of employment. Respecting that the Fed does not have a crystal ball, the data-driven approach noted by Mr. Williams appears appropriate, responsible, and most likely in Nevada’s best interest.

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September 2014

Tesla recently chose Nevada as the site for its 5-million-square-foot battery factory. According to initial estimates, the factory will potentially have a $100-billion economic impact over 20 years, with direct and indirect job creation totaling upwards of 22,000 positions. In a recent special session, the Nevada State Legislature approved four bills that will provide Tesla with the largest incentive package in Nevada’s history, totaling roughly $1.3 billion over 20 years. In addition, the company has agreed to make contributions to education in the state as well as make the hiring of Nevadans and veterans a priority.

Tesla’s battery manufacturing facility, or “Gigafactory”, will be located in Storey County, and at more than 5 million square feet, the facility is expected to be one of the largest buildings in the world. The company plans on investing $5 billion in the project within the first 3 to 5 years, with $1 billion sourced to constructing the building and another $4 billion sourced to equipment purchases. An additional $5 billion is planned for future equipment replacements, for a total investment of $10 billion. More than 3,000 construction workers are estimated to be employed to build the facility and install equipment over a three-year period.
In exchange for building its facility in Nevada, Tesla will receive a large incentive package that will include the following:


  • Up to 100 percent of Tesla’s sales tax will be abated until June 30, 2034, and 100 percent of its real property tax, personal property tax and modified business tax will be abated until June 30, 2024.
  • Tesla will receive a transferable tax credit of $12,500 per permanent, full-time job
    for up to 6,000 jobs. In addition, a transferable tax credit of 5 percent will be received for the first $1 billion investment as well as a credit of 2.8 percent for an additional $2.5 billion investment. The total value of these tax credits is estimated at $195 million Funding for the credits is sourced to repurposing of existing tax credits and exemptions.
  • Reduced electric rates for ten years are included in the package.
  • Tesla will be allowed to sell its cars in Nevada without a franchise agreement.


In addition, infrastructure improvements are anticipated. USA Parkway will be expanded to connect Interstate 80 to U.S. Highway 50. The cost of this project is expected to top $100 million, and it may further spur development in the Tahoe-Reno Industrial Center and provide residents in neighboring Lyon County with easier access to jobs in the area.

The incentives suggest Tesla may not be paying major taxes for 10 to 20 years; but for the incentives, the company would not likely be investing in Nevada. Tesla will contribute $37.5 million to K-12 education in the state beginning in August 2018 as well as provide $1 million to UNLV for battery research. Additionally, the company will make hiring Nevadans and veterans a priority when filling the 6,500 permanent positions that will pay an average of over $25 an hour.

In addition to the 6,500 permanent workers that are estimated at Tesla’s factory, the company’s presence in Nevada is expected to support 16,000 indirect jobs in the community, according to third-party reports. The employment gains, assuming they materialize as planned, will be welcome in a state where the unemployment rate currently stands at 7.7 percent (as of July 2014). While the rate is down 6.2 percentage points from the high of 13.9 percent reached in August 2010, it remains up 3.5 percentage points from the low point of 4.2 percent (February 2007) and is 1.5 percentage points higher than the national average of 6.2 percent. Employment gains in the manufacturing sector are expected to further diversify the employment base in the state. Nevada’s Hachman Index, which measures economic diversity with 0 being completely undiversified and 100 reflecting the national average, is currently 74.6. Holding all other factors constant, the addition of the manufacturing jobs would increase the index to 75.2.

Tesla’s expansion to the Reno area is a boon to the economy and confirms the Silver State’s pro-business environment.

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August 2014

Nevada has been presented with a series of opportunities not seen since the onset of the Great Recession. New projects on the north end of the Strip in Las Vegas, industrial projects in Reno and tech startups and relocations statewide have shown Nevada’s economy is more resilient and adaptable than some observers thought.

Signs of recovery and expansion abound in the tourism sector. SLS Hotel & Casino, an overhaul of the former Sahara Hotel & Casino, will open on August 23rd, bringing more than 3,000 jobs, 1,600 hotel rooms and a renewed energy to the north end of the Las Vegas Strip. Not far from the SLS, Genting Resorts World will soon begin construction on the site of the former Stardust Resort & Casino, a $4-billion undertaking. Other positive news came in the form of Crown Resort’s (headed by James Packer, an Australian billionaire) purchase of the former New Frontier property, with reported plans to eventually open up a new casino resort on the site. Further projects include MGM’s City of Rock festival grounds, the MGM/AEG Arena, New York New York’s Park retail project, renovation and rebranding of the Delano and Linq Hotels, the Bally’s Bazaar, the Mandalay Bay Convention Center expansion and the recent opening of the Cromwell and Linq. All of this comes at a time when total visitation to Clark County is still 1.0 percent below its pre-recession peak and gaming revenue is 11.1 percent below its highest twelve month total. These additional investments are expected to generate increased interest (i.e., visitor trips); however, many industry experts remain concerned about whether the market can truly sustain supply additions or whether these projects will simply cannibalize existing market share.

In the north, recent announcements include the largest corporate expansion in Nevada’s history. Tesla announced site work for their gigafactory has been completed. In just three and a half weeks, construction workers cleared a massive pad for the $5-billion project in a large-scale demonstration of Nevadans getting back to work. The Tesla project is far from a certainty, with talk of a special session of the Nevada State Legislature and speculation that land clearing in Reno could simply be used as leverage in negotiations with other states. That being said, the work is certainly welcome. Unemployment in the Reno area is at 7.2 percent, lower than the state average of 7.7 percent, but still considerably higher than the national rate (6.2 percent in July). Average total employment during the past twelve months has grown 2.3 percent in Washoe County; and, in particular, the construction sector has grown 14.3 percent during the same period. Though Tesla is continuing to pursue negotiations and potentially site work in other states for its coveted factory, Nevada will benefit either way as other companies will take a closer look at the amenities offered in the Tahoe-Reno Industrial Center. Other success stories in the area include the geothermal industry, which continues to take advantage of Northern Nevada’s unique geology, and a recently opened nightclub in the Grand Sierra Resort, which reported having to hire additional employees to meet demand.

Tech, including globally competitive datacenters, has proven to be a catalyst for incremental investment in both the north and the south. Projects, including Apple’s datacenter, have acted as bellwethers for tech companies looking to invest in Nevada. The company has planned an additional two new data buildings, bringing the total to 10 datacenters. Though it is early, and difficult to tell whether Apple has caused companies to relocate/collocate, the Economic Development Authority of Western Nevada (EDAWN) has reported a marked increase in inquiries from technology companies. In Las Vegas, Switch has started construction on SuperNAP 9, its largest data center yet at 575,000 square feet. Switch, while somewhat less recognizable than Apple or other tech giants, may very well be more vital to the State’s economy. Not only is Switch the state’s largest startup in a generation, but its collocation strategy and innovative technologies have prompted, at least in part, companies such as Wirelessor, Zumasys, and Tracky to locate their operations in Nevada. Switch plans for 10 SuperNAPs in its current Las Vegas campus, and wants to export the design and knowledge gained in Nevada across the globe for construction of further SuperNAP facilities. Tech communities made up of smaller startups also continue to coalesce around Downtown Reno in Startup Row and Las Vegas around Downtown Project’s various enterprises as they prove to be centers for collaboration and innovation.

Renewed interest in Nevada, both from existing businesses and those seeking out new markets, is an encouraging sign the state’s elongated economic recovery has transitioned into economic resurgence. There is little doubt that Nevada has residual challenges, not only from the recession but also from the state’s narrow economic base and underperforming education system. These challenges notwithstanding, economic growth tends to follow investment and population growth. Nevada currently has both and seems to be picking up steam.

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July 2014

The Federal Reserve is considering an end to its extraordinary treasury and mortgage-backed security purchasing program, known as quantitative easing, this October. This measure has injected large amounts of currency into the economy, lowering interest rates and increasing investments. In particular, mortgage rates, which currently average 4.12 percent for a thirty-year loan, are still near their historical low of 3.31 percent set in November 2012. Relatively low rates helped spur the housing recovery, reduced interest costs and increased consumer spending in Nevada and throughout the nation.

The impact of the slow end of quantitative easing was largely felt in June of 2013, when interest rates increased 65 basis points (0.65 percentage points) from the previous month. The program's actual end is expected to have modest impacts on interest rates in the near term; rates have adjusted for much of it already. It does, however, potentially mark a turning point in the recovery, one where the national economy no longer needs extraordinary measures to move forward.

Cheap credit has allowed the economy to expand considerably. As of the first quarter, mortgage payments made up 4.8 percent of personal disposable income, the lowest share since 1981. The total value of mortgages in the economy is still 10.4 percent below the Q2 2008 peak value, and has risen only 0.4 percent since bottoming out in Q1 2013. The low rate of new mortgage debt, combined with historically low rates, has allowed households across the country to lower their debt payments, freeing money for other areas of spending.

One thing consumers are buying in droves are new automobiles. In the second quarter, 16.5 million cars were sold, more than any quarter since 2006. In the U.S., the trailing twelve months of auto sales through June 2014 are up 54.1 percent since bottoming out in the 12 months ending October 2009. As cars and other durable goods were forced to last longer during the downturn, it is perhaps not surprising that consumers are finally starting to replace aging equipment. As of April, taxable auto sales in Nevada were up 62.3 percent since the low point reached during the recession.

Other durable goods in Nevada, including furniture sales (+32.9 percent since trough) and building and gardening supplies (+24.6 percent), have increased faster than taxable retail sales as a whole (+24.3 percent). Across the country, durable personal consumption expenditures in the twelve months ending June 2014 were $15.3 trillion dollars, an increase of 25.4 percent from the trough of the recession. By comparison, non-durable expenditures have increased by 23.0 percent since bottoming out. Consumers in Nevada and in the U.S. as a whole are taking advantage of low interest rates by replacing aging items that had their lives extended during the Great Recession.

The end of quantitative easing does not mean this trend will stop. The Federal Reserve expects to maintain a low interest rate policy, while much of the injected capital remains in the market. The velocity of money, a ratio of GDP to the amount of currency and highly liquid money (money market, savings, and small CDs) available to investors, was at an all-time low during the first quarter. GDP was only 1.53 times the liquid money stock, well below any historical value since the figure began to be tracked in 1959. As money available from the Fed begins to tighten, this figure is anticipated to gradually rise back to more normalized levels. Money stock is not expected to remain idle as reserves for corporations, banks, and individuals; rather, funds may be put to more productive uses – with the expectation of continuing to expand the economy.

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July 2014

The Federal Reserve is considering an end to its extraordinary treasury and mortgage-backed security purchasing program, known as quantitative easing, this October. This measure has injected large amounts of currency into the economy, lowering interest rates and increasing investments. In particular, mortgage rates, which currently average 4.12 percent for a thirty-year loan, are still near their historical low of 3.31 percent set in November 2012. Relatively low rates helped spur the housing recovery, reduced interest costs and increased consumer spending in Nevada and throughout the nation.

The impact of the slow end of quantitative easing was largely felt in June of 2013, when interest rates increased 65 basis points (0.65 percentage points) from the previous month. The program’s actual end is expected to have modest impacts on interest rates in the near term; rates have adjusted for much of it already. It does, however, potentially mark a turning point in the recovery, one where the national economy no longer needs extraordinary measures to move forward.

Cheap credit has allowed the economy to expand considerably. As of the first quarter, mortgage payments made up 4.8 percent of personal disposable income, the lowest share since 1981. The total value of mortgages in the economy is still 10.4 percent below the Q2 2008 peak value, and has risen only 0.4 percent since bottoming out in Q1 2013. The low rate of new mortgage debt, combined with historically low rates, has allowed households across the country to lower their debt payments, freeing money for other areas of spending.

One thing consumers are buying in droves are new automobiles. In the second quarter, 16.5 million cars were sold, more than any quarter since 2006. In the U.S., the trailing twelve months of auto sales through June 2014 are up 54.1 percent since bottoming out in the 12 months ending October 2009. As cars and other durable goods were forced to last longer during the downturn, it is perhaps not surprising that consumers are finally starting to replace aging equipment. As of April, taxable auto sales in Nevada were up 62.3 percent since the low point reached during the recession.

Other durable goods in Nevada, including furniture sales (+32.9 percent since trough) and building and gardening supplies (+24.6 percent), have increased faster than taxable retail sales as a whole (+24.3 percent). Across the country, durable personal consumption expenditures in the twelve months ending June 2014 were $15.3 trillion dollars, an increase of 25.4 percent from the trough of the recession. By comparison, non-durable expenditures have increased by 23.0 percent since bottoming out. Consumers in Nevada and in the U.S. as a whole are taking advantage of low interest rates by replacing aging items that had their lives extended during the Great Recession.

The end of quantitative easing does not mean this trend will stop. The Federal Reserve expects to maintain a low interest rate policy, while much of the injected capital remains in the market. The velocity of money, a ratio of GDP to the amount of currency and highly liquid money (money market, savings, and small CDs) available to investors, was at an all-time low during the first quarter. GDP was only 1.53 times the liquid money stock, well below any historical value since the figure began to be tracked in 1959. As money available from the Fed begins to tighten, this figure is anticipated to gradually rise back to more normalized levels. Money stock is not expected to remain idle as reserves for corporations, banks, and individuals; rather, funds may be put to more productive uses – with the expectation of continuing to expand the economy.

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June 2014

Nevada’s post-recession economic recovery slowed somewhat during 2013, according to the annual gross state product (GSP) figures released by the Bureau of Economic Analysis in June 2014. Overall, the state’s economy grew 2.4 percent during 2013, generating a total of $132.0 billion in economic activity. This rate of growth was considerably slower than that seen in 2012, when the economy expanded by 4.5 percent over the previous year. With shifts in selected industries (e.g., mining) contributing to the overall slowdown, the latest data suggests Nevada’s overall rate of growth is underperforming compared to the nation as a whole, which grew by 3.4 percent during the same timeframe.

Comparisons to the 2012 rate of expansion should consider contributions of the mining sector, which grew considerably faster than the rest of the economy in 2012 due to relatively high gold prices. Holding mining constant at 2011 levels, the Nevada economy grew 3.4 percent on an adjusted basis in 2012. Excluding the impacts of gold prices, the Nevada economy expanded by 4.1 percent during 2013. As such, disregarding gold prices and their impacts on the mining sector, Nevada’s economy is continuing to press forward in its recovery at a relatively accelerated pace.

Finance, insurance, real estate, rental and leasing was the fastest growing industry with over $1.7 billion in output added in 2013, accounting for 54.5 percent of the $3.1-billion growth in GSP in Nevada last year. Fast-growing components of this sector included not only a strengthening real estate market, which grew 6.3 percent during the year, but finance and insurance which grew at a 9.3-percent pace, faster than the national average of 3.7 percent. The recovering economy and low interest rates are allowing Nevadans to borrow for new homes and businesses or perform other financial transactions at a relatively fast pace. Overall, the financial super-sector accounts for 19.5 percent of Nevada’s GSP.

The state’s hard-hit construction sector also grew considerably last year, with $471 million in additional economic output (+8.6 percent) reported in 2013 over the prior year. Overall, the sector has grown 10.6 percent since bottoming out in 2011; however, the construction industry remains 55.2 percent smaller than its pre-recession high in 2007. In 2007, construction represented 10.0 percent of Nevada’s output ($13.2 billion), while today it accounts for just 4.5 percent ($5.9 billion). In residential construction, home values continued to escalate in 2013, with the housing price index increasing 24.9 percent during the year. Furthermore, homebuilders obtained permits for 11,215 new housing units in the state, an increase of 24.3 percent over the prior year’s construction total. Perhaps the biggest turnaround came from commercial construction, which essentially doubled in the past year in Washoe and Clark counties, with $618.6 million permitted in 2013.

The only industry that shrank during the year was the mining industry, losing $2.1 billion in output value in 2013 (-20.4 percent). The falling price of gold, which represents the majority of Nevada’s mining revenue, fell considerably, beginning the year at $1,657 per troy ounce, and falling 27.3 percent to $1,204 per troy ounce by the close of the year. According to Major Mines of Nevada 2012, $9.3 billion of the $10.4 billion mined in the state came from gold mines (88.6 percent). Mining in Nevada currently accounts for 6.1 percent of the state’s economic activity, or $8.1 billion.

Finally, the state’s arts, entertainment, recreation, accommodation and food services sector grew 3.2 percent during the year. Nevada's second-largest super-sector in terms of GSP is responsible for 16.6 percent of the state’s economy. Though the state’s tourism industry remains critical to Nevada’s economy, its share of output is down considerably from 2000 when it was responsible for 20.4 percent of GSP, largely due to continued economic diversification efforts throughout the state.

Nevada continued to gain ground in 2013 in terms of economic recovery. Every super sector outside of mining made considerable gains in economic output over the prior year. The portions of the economy that grew the fastest included those previously hardest hit and those associated with selected professional service areas. From an economic perspective, the Silver State turned in a respectable performance in 2013. Signals in the first half of this year suggest a similar performance may be achievable in 2014.

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May 2014

Nevada’s recovery continues to press forward, though the underlying dynamics continue to pose significant questions regarding the sustainability of economic growth. Home prices have started to stabilize, but new inventory continues to come online. New jobs continue to be created, yet personal income has failed to act in kind. Taxable retail sales are growing at a slower pace; however, much of the gains are coming from narrow segments of the economy. The uncertainty arising from these trends continues to plague an economy that has shown a remarkable recovery since the Great Recession but which remains well below peak levels in nearly every major economic performance indicator.

Home prices compared to the previous year were still up as of the fourth quarter of 2013 (latest available data), with the housing price index up 24.3 percent from a year ago; however, price increases have slowed considerably. Since August 2013, median existing home prices in Nevada increased by only 0.9 percent to $175,000. Sales volume of existing homes stalled, with 3,761 closings reported during the month (down 21.9 percent from February 2013). Approximately 1 in 5 existing home sales were distressed in February, one of the lowest rates since the onset of the housing crisis.

A lack of existing supply, from both distressed and traditional sales, is a concern homebuilders are hoping to mitigate in the near future. During the past twelve months (April 2013 through March 2014), 10,553 new homes have been permitted, an increase of 23.5 percent when compared to the same period last year. The new inventory has resulted in 9,119 new home sales (+1.8 percent) in the twelve months ending February 2014 (latest available data) while keeping median prices stable at $272,665.

Nevada employment continued to expand in April, with 1.2 million nonfarm jobs in the state, representing an increase of 3,000 jobs (+0.2 percent) compared to March. The unemployment rate fell to 8.0 percent, helped not only by job creation, but also by a 0.3-percent decrease in the labor force (including people actively looking for work) in April. A large portion of the new jobs are sourced to gains in the construction sector, which grew 9.4 percent in the past year to 62,600 seasonally adjusted jobs in April. The recent growth reported by the construction sector was more than double the average rate of growth for the overall economy during the same period (3.5 percent). Construction, led partially by a thirst for new housing and renewed interest in large commercial projects, is expected to outpace the remainder of the economy during the next few years, but is unlikely to reach pre-recession levels in the near future.

Increased employment has allowed personal incomes to grow to $110.2 billion per year, up 2.0 percent over last year. Though the increase sounds substantial, in reality, the 1.5-percent price inflation over the same period diminishes much of those gains. Over the past year, the net earnings by place of residence, which only considers employee and proprietor income minus pension and social insurance contributions, has risen only 2.8 percent. When adjusted for inflation, this rate of growth falls to 1.3 percent, which compares unfavorably with the 3.3 percent employment growth reported during the same period. A relatively modest amount of money has entered the economy as a result of the economic recovery during the past year, leading to mixed results in other sectors.

February’s taxable retail sales reflect the modest personal income growth. Sales during the month were $3.5 billion, an increase of 4.6 percent over last year. During the month, restaurant sales increased by roughly $76.2 million (+10.2 percent), while auto sales increased by $24.8 million (+6.2 percent) compared to the prior year. These two categories represented 35.6 percent of total taxable retail sales during the month of February and 65.3 percent of overall growth in taxable sales. Though promising, these categories largely represent visitor spending and the need to replace automobiles that were forced to last longer during the Great Recession. The average age of cars in the country was a record 11.4 years as of 2012 (the latest available data), reflecting car owners’ need to stretch their budget further during the recession and recovery, as well as a potential pent-up demand for vehicles.

Though the housing sector and overall employment figures remain strong, growth in other portions of the economy remains questionable. Higher employment has not led to similar increases in personal incomes, and growth in taxable retail sales seems to be dependent on a few key sectors rather than a broad-based growth. Overall, the recovery still looks promising, but beneath the surface lie a number of concerns.

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April 2014

Nevada’s economic recovery from the Great Recession has been filled with mixed signals. Core statistics like the population in-migration, housing starts and visitor volume have reported strong growth and consistent gains, while others, such as gross gaming revenue, commercial vacancies and personal incomes, have reported slow and staggered progress. The varying performance of various indicators notwithstanding, there is one factor that stands above the rest in defining Nevada’s progress – employment.

Nevada’s unemployment rate currently stands at 8.5 percent, down 1.8 percentage points during the past 12 months and 5.4 points from the high point of 13.9 percent reported in October 2010. While seasonally adjusted unemployment continues to fall, the mathematics underlying the unemployment calculation have shifted materially. The unemployment rate is comprised of two population groups, those who are actively seeking employment (i.e., the unemployed) and those who are in the labor force (i.e., defined as currently working or actively seeking work). The sharp reduction in Nevada’s unemployment rate between 2012 and 2013 is attributable not only to more people finding a job, but also a significant reduction in the number of people actively looking for work.

After nearly three years of a stagnant economy, many discouraged job-seekers stopped searching for work. In fact, between December 2010 and December 2013, Nevada’s labor force fell from 1,394,404 to 1,364,678, or by 2.1 percent. The decline during this period ranked the state 12th nationally. Recently, however, this key trend has witnessed an important shift. In February 2014, for the first time since April 2011, Nevada’s labor force grew. Though there was only a net increase of 709 people added to the labor force (i.e., net new people looking for a job or working in a job) during the past year, the shift signals that the labor market is beginning to recover in a more meaningful way, including attracting previously discouraged job-seekers back into the fold.

Notably, the average number of hours worked per worker per week remained at 33.3 in February 2014, the same rate as reported one year ago. From 2010 to 2013, the recovery had been marked by more people working fewer hours on average. In fact, the number of hours worked per private sector employee decreased from 35.6 to 33.5 between February 2010 and February 2014. Stated otherwise, even though the number of employees in the private sector increased from 964,300 to 1,052,500 (+9.1 percent), the aggregate number of weekly hours worked by private workers increased by a more modest 2.7 percent, or from 34.3 million to 35.2 million.

The resulting underemployment masks the residual challenges existing throughout the economy. In 2013, Nevada’s U-6 unemployment rate, which includes frustrated job-seekers and those who are underemployed, stood at 18.1 percent (the highest in the nation by more than a percentage point). This challenge continues to affect personal income growth and spending metrics.

Certain sectors have also been heavily impacted by underemployment, though they are not necessarily the same ones that have had the hardest time since the recession. From 2010 through 2013, in spite of the construction sector losing 2,300 jobs (-3.9 percent), average weekly hours worked in the sector rose to 36.4 (+6.7 percent). In contrast, the leisure and hospitality sector gained 15,700 jobs (+5.1 percent) during the same time frame, and average weekly hours fell from 32.1 to 29.8 (-7.2 percent). Other sectors heavily impacted by underemployment include retail, which fell from 32.7 to 30.0 hours(-8.3 percent) and trade, transportation, and utilities, which dropped from 35.9 to 33.9 (-5.6 percent). The stabilization of the hours worked per week reported in February, combined with rising employment levels, is an important step in the recovery.

Recent labor force trends may very well be the most important indicator that Nevada’s economic recovery is truly taking hold. Newfound optimism, more people working and a stabilizing amount of work per employee have allowed personal incomes to increase, further improving other sectors of the economy. This virtuous cycle may lead to accelerating employment gains in the future as Nevadans move beyond the pains of the Great Recession and begin to look forward to the future.

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March 2014

Is Nevada's economy experiencing a new normal?

In her February 27, 2014 statement to the United States Senate Banking Committee, recently confirmed Federal Reserve chairwoman Janet Yellen stated that the nation is "a lot closer to a normal economy than we've been in a long time." This prompted a discussion item from Nevada Senator Dean Heller who asked if a persistently high unemployment rate of nine percent could be a new normal for Nevada. In response, Chairwoman Yellen surmised that "Nevada is one of the states that has been most badly affected" by the downturn, and that the state is still "some years" away from what might be considered a normal economy.

This has prompted a renewed debate over the question of exactly what constitutes a "normal" Nevada economy. Most observers agree that it does not resemble any of the rapid growth from 1986 to 2006 when Nevada was leading the nation in population, employment and income growth and the state's unemployment rate reached a remarkably low 4.2 percent. Similarly, there is general agreement that there is nothing normal about the last 8 years when unemployment rose to a nation-leading 13.9 percent, 1 in 6 private sector jobs were lost and housing prices declined by 60.2 percent. For the past decade, Nevada's economy has been on a rollercoaster ride, dominated by periods of nation-leading growth and nation-leading decline. While reasonable minds may differ when it comes to the definition of "normal," for Nevada there are three principal conditions that are needed for the economy to be stable: (1) a modest growth rate; (2) a healthy tourism sector; and (3) the presence of economic diversification.

Whether we like it or not, Nevada's economy has been predicated on growth and expansion during the vast majority of the past century. The state's economic and fiscal systems are highly dependent on population growth and new business investment. The economy has been growing steadily since bottoming out after the Great Recession. According to the US Census, Nevada's population growth, at 1.3 percent in 2013, ranks the Silver State the 5th fastest growing state in the nation. Personal income has also increased 11.7 percent since hitting bottom in the first quarter of 2010. Housing prices in particular have had a robust recovery, with Nevada's home prices gaining 48.2 percent during the past two years of the recovery phase. Housing prices in the state remain 41.0 percent below their peak in Q1 2006. Employment growth has also been robust, as 42,600 new jobs (+3.7 percent) were created during 2013 for a total of 1,203,100 jobs. The state has continued to grow its employment base at an increasing rate in the aftermath of the recession.

Nevada's economy is also remarkably tourism dependent. The tourism economy accounts for 27.9 percent of jobs, 25.1 percent of wages, and 16.2 percent of the state's economic output. During the low point of the Great Recession, visitor volume decreased by 10.7 percent to 44.1 million visitors. Since then, visitor volume has increased by 8.0 percent, currently standing at 47.6 million (3.5 percent below the peak level reported in January 2006). The landscape has changed dramatically for the tourism industry in the state as well, as major sources of revenues for hotel-casino operators have shifted in recent years. During the past year, gaming revenues accounted for 37.0 percent of total revenues reported by Las Vegas Strip gaming operators, down from 43.0 percent 10 years ago and 57.0 percent two decades ago. While expansions of gaming around the globe are contributing to the shift, investments continue to be made in Nevada, particularly along the Las Vegas Strip.

Nevada's economy remains too narrow, which is to say that it is too highly dependent on a single industry: tourism. There is little argument that diversity is needed; however, Nevada's ability to compete for new and expanding businesses is at best uncertain. Though the recession harmed a wide swath of Nevada's businesses, the state's economy does continue to diversify. Nevada's Hachman Index, which measures economic diversity, ended the year at 72.9, the highest index value in state history. In 2000, the value of this index was just 61.9. During the past couple of years, investment interest has increased in the state, with unmanned aerial vehicle development, Tesla's immense battery factory, and numerous other industries considering expansion in the state. Nevada's growth since the recession has been led by professional services, trade, transportation, education, and healthcare firms, and not exclusively new tourism jobs.

Nevada is rarely described as being normal; our economy has been no different. While there is no argument to be made with Chairwoman Yellen's assertion that Nevada was disparately impacted by the Great Recession, the idea that our state's recovery is going to be a "long slog" seems at least somewhat pessimistic for a state that is at or near the nation's highest in terms of population growth, new job creation and housing price appreciation.

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February 2014

Nevada economic indicators show improvement in 2013

The numbers have been tallied. This latest economic briefing provides the first opportunity to evaluate the annual performance measures for Nevada in 2013 and how they compare to the prior year. While a select few performance indicators have yet to be compiled for the month of December 2013, the majority of data points include year-end final figures, and the majority of those suggest 2013 ended the year in a better position than where it started.

From an employment perspective, the year-end report suggests that there were more people working within Nevada businesses in December 2013 than in the same month in 2012 (+21,500 jobs). The annual growth rate of 1.8 percent for the year was primarily driven by stronger hiring activity in the retail sector, the education and health services sector and the government sector. These three areas accounted for 15,800 incremental jobs, or nearly 3 out of 4 new positions in the past year.

The push in these service sector positions helped to drive down the overall unemployment rate to a seasonally adjusted level of 8.8 percent. One year ago, the Nevada unemployment rate stood at 9.8 percent. The unemployment rate is a labor force concept which is survey-based, while the previously mentioned job growth figure reflects the count of employees working in Nevada business establishments. The unemployment rate's decline was driven by a shrinking pool of potential workers - the labor force - and rising employment. By the end of 2013, there were 8,400 fewer individuals in the labor pool (-0.6 percent). Additionally, the number of people actively looking for work who were unable to secure a position declined by 13,900 potential workers (-10.4 percent). Regardless of how the job market's performance is measured, the absolute number of employees expanded in 2013, and the number of active jobseekers declined.

While the leisure and hospitality sector posted a stable overall performance in 2013, broader economic growth was largely sourced to non-tourism industries. Directly accounting for nearly 3 out of 10 jobs statewide, job growth within the tourism sector was positive (+0.4 percent), visitor volumes for the Las Vegas Area and Washoe County reached a combined all-time high, and gaming revenues statewide were up 2.6 percent.

Two areas of notable expansion in 2013 included consumer spending and the housing market, with the former likely impacted by the latter. As home prices expanded by impressive levels in 2013 (with some areas up as much as 30 percent), the share of homes that were underwater shrank to 32.2 percent from 56.9 percent during the past year, providing residents with improving personal balance sheets - even if only on paper. The new home sector also posted healthy price gains, supporting an increase in new home construction, something not witnessed in the prior year.

Overall spending levels responded to the improving economic climate and indicated that consumers are continuing to feel more stable in their personal financial situation. Statewide taxable retail sales, a key measure of spending, reached $46.2 billion during the past 12 months ending November 2013, which was up 5.2 percent on the year. The latest spending data is also up from the cycle-low of $37.8 billion in March 2010 (+22.3 percent).

While challenges sourced to mortgage delinquencies, a lagging construction sector and potential legislative headwinds remain on the horizon, the Nevada economy appears to have made measured progress in 2013. From an economic perspective, the positives are expected to outweigh the negatives moving through the first half of 2014.

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January 2014

Monetary policies benefiting states like Nevada

The U.S. Senate's recent confirmation of Janet Yellen as the new Chair of the Federal Reserve System has removed one of the uncertainties regarding the future of our nation's economy. It is believed that Ms. Yellen, previously the Vice Chair at the Federal Reserve, shares similar beliefs as her soon-to-be predecessor, Benjamin Bernanke, in terms of monetary policy. Most market observers suggest that Yellen's appointment signals continued supportive monetary policies by the Federal Reserve, bolstering economic growth and benefiting states like Nevada where the unemployment rate remains stubbornly high. Others remain concerned, however, that a continuation of the current course leaves the nation at increased risk for higher interest rates.

The Federal Reserve continues to employ historically extraordinary measures in an effort to stimulate the economy. Rates charged to banks for borrowing funds overnight are virtually zero and are expected to remain at or near that level through 2015. Interest rate adjustments are a measure commonly taken to counteract the effects of economic downturns, essentially decreasing the cost of borrowing and increasing investment. Quantitative Easing (QE), on the other hand, is a more recent tactic whereby the Federal Reserve buys trillions of dollars in bonds. This program was put in place by Chairman Bernanke to assist the economy during the unprecedented crisis the Great Recession presented, when interest rate reductions alone were simply insufficient to catalyze the nation's ailing economy. Currently, this bond-buying program is being tapered off and is likely to wrap up sometime in the coming year. Near zero interest rates are expected to continue until the national unemployment rate drops (at 6.7 percent as of December) or, more importantly, the nation's economy demonstrates a consistent ability to create new jobs (job growth was a lower-than-expected 74,000 in December). The other consideration, of course, is signs of higher inflation. As of November, the Consumer Price Index was up a manageable 1.2 percent.

Nevada continues to lag behind the rest of the country in some aspects of its economic recovery, reporting an unemployment rate of 9.0 percent in November. However, it is worth noting that the latest figure represents a significant improvement over the 10.0 percent reported just one year ago. Taxable sales in the state increased 5.6 percent during the 12 months ending October 2013, though they remain far below their pre-recession peak. Nevada is clearly benefitting from the Federal Reserve's aggressive monetary policies, as banks are lending more and businesses are investing in new facilities and new equipment. The state's nation-leading rate of unemployment is largely tied to a higher-than-average share of the state's workforce with limited education or transferable skill sets, as businesses in growing health care and technology industries are actually reporting difficulty filling open positions.

Should a slowdown emerge in the amount of money the Federal Reserve puts into the economy through future quantitative easing, the Nevada economy could be impacted in a number of ways. Higher interest rates could negatively affect demand among potential buyers in Nevada's housing market, where prices increased 25.2 percent in the four quarters ending Q3 2013. Future commercial ventures are also at risk, as required rates of return for projects increase along with the interest rate. Notably, commercial building permits in Washoe and Clark counties are up 75.4 percent in October over one year ago (a total of $553.8 million in commercial permits during the past twelve months), but still 34.8 percent below the 2000-2003 average, before the speculative property bubble. The $133.8 billion in deposits at Nevada banks would also pay more in interest, increasing incentive to save rather than spend or invest in new ventures.

There are plenty of reasons to believe that Nevada has benefited significantly from the Federal Reserve's policies during the past several years and may be impacted disproportionally as they wind down. Although the Fed has already started to rein in on the most controversial aspects of its stimulus programs, there is little doubt that the tenure of Ms. Yellen as chair will continue to use the Fed's monetary muscle to bolster economic growth so long as inflation remains in check and the nation's economy struggles to create jobs for unemployed job seekers. This will benefit Nevada and the balance of the nation; however, the longer-term implications remain somewhat uncertain. The M2 Money Stock, which is generally defined as the combined amount of monetary assets in the economy at a specific point in time, has increased from $8.0 trillion in November 2008 to $11 trillion in November 2013. A 37-percent increase in the amount of money in circulation certainly helped bolster the economy in a time of need; it also increases the risk of inflation as the economy recovers.

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