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Nevada Economic Conditions

The US economy exploded with new growth in the fourth quarter of 2009 as GDP growth soared to a 5.7% annualized growth rate. In the 3rd quarter, real GDP advanced at an annual rate of 2.2%. GDP, a measure of the total value of all final production in the US, is composed of investment by firms and individuals, consumption by households, government spending, and exports less imports. The primary driver of the fourth quarter results was investment by private firms. Personal consumption expenditures and exports also contributed positively to the expansion. Growth in private investment expenditures is a sign that some firms may be hiring in the near future. Nevertheless, most economists agree that this level of growth is not sustainable and we are likely to see more moderated growth in 2010.

The Nevada economy has yet to enjoy any part of the US recovery. Unemployment remains high, reaching 12.8% in November. This translates into annual job losses akin to 6.5%. The fiscal situation continues to be dire; taxable sales are down nearly 11% year over year. Although recent advances in gaming revenue offer a tiny bright spot on the horizon, the modest growth has taken place after double-digit declines so that total gaming revue collections are well below the peak of 2007. This points to continued fiscal stress for the Nevada economy. Governor Gibbons has called a special session of the legislature to address what appears to be an almost $1 billion shortfall in state revenues.

The poor economic condition of the state is mirrored in the Southern Nevada economy. The unemployment rate rose to 13.1%. Still, it is important to note that the unemployment rate only counts the number of people actively seeking work. Underemployed people-working in part time jobs-and discouraged workers who have left the labor force are not counted in the official unemployment rate. When underemployed and discouraged workers are added, the unemployment rate for the state of Nevada climbs to 19.2%.

Many Nevadans are asking: when will Nevada and Clark County begin to recover? I predict that we will see some employment growth by the end of the year. However, the new growth will follow two years of dramatic decline, so general economic activity will be well below the 2007 peak for quite some time. It is likely to be five or more years before we see any boost in residential and commercial construction, and we are very unlikely to ever see an expansion like that from 1994-2007 again. Just as the construction phase of many major projects involves far more jobs than the operations and maintenance phase, the number of jobs required to keep the Southern Nevada economy going without substantial growth will be lower than in the boom years.

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