A monthly report produced for CommerCe reAl estAte solutions by stephen P. A. Brown, PhD, Center for Business & economic research university of nevada, las Vegas

An AccelerAting recoveryin the West

issue 4 April 2011

As economic activity in nevada’s neighboring western states improves—particularly in populous California—nevada will see increased tourism, hospitality and gaming activity.

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In 2010, Nevada gaming revenue increased by only 0.1 percent. According to the Western Blue Chip Economic Forecast, a survey of experts conduced by the W.P. Carey School of Business at Arizona State University, Nevada gaming revenue will increase by 3.1 and 3.0 percent in 2011 and 2012, respectively.

Despite forecasting fairly strong gains in gaming revenue, the Nevada experts participating in the Western Blue Chip Economic Forecast see only a slow turnaround in the overall Nevada economic activity with some acceleration in 2012.

Most of the western states experienced weaker economic conditions in 2010 than the nation as a whole. Although U.S. economic activity increased in 2010, total U.S. nonfarm employment dropped by 0.7 percent from 2009 to 2010. Most western states saw bigger declines. According to the Western Blue Chip Economic Forecast, the outlook for Nevada’s neighboring states should expect substantially improved economic conditions for the remainder of 2011 and through 2012. However, Nevada will expect a decrease before rebounding, Table 1. Similar gains are expected in personal income, increasing the remainder of 2011 and throughout 2012, including Nevada. However, New Mexico and Utah are expected to both experience a year of decreases, Table 2.

Because many of the visitors to Nevada come from neighboring western states, some of the Silver State’s economic weakness in 2010 can be attributed to generally poor economic conditions throughout the west.

tabl

e 1

state2010

% change2011

% change2012

% change

Arizona -2.1% 1.4% 2.3%California -1.4% 1.2% 2.0%Colorado -1.1% 1.1% 1.7%nevada -2.8% -0.4% 1.2%new mexico -1.3% 1.0% 1.9%oregon -0.7% 2.2% 2.8%utah -0.6% 1.4% 2.7%Washington -1.5% 1.4% 2.6%

Non-Farm Employment Growth Outlook

Source: Western Blue Chip Economic Forecast

tabl

e 2

state2010

% change2011

% change2012

% change

Arizona 2.1% 3.6% 4.6%California 2.5% 3.9% 4.2%Colorado 2.2% 4.1% 4.5%nevada 0.3% 1.1% 2.2%new mexico 3.5% -2.7% 3.2%oregon 2.6% 4.3% 4.7%utah 2.3% 4.5% -3.5%Washington 2.5% 4.8% 4.9%

Growth Rate of Personal Income Outlook

Source: Western Blue Chip Economic Forecast

neVADA’s ECONOmy April 2011

COmmERCE REal ESTaTE SOluTIONS | Comre.Com

Construction of single-family homes in Nevada is also projected to remain subdued. In 2010, permits for the construction of single-family homes fell by 4.9 percent. According to the Western Blue Chip Economic Forecast, a decline of 0.5 percent is expected for 2011 with a modest gain of 2.9 percent projected for 2012. These figures show much weaker expectations for Nevada’s housing market

than those in other western states—which are expected to see gains in permits for single-family homes that range from 7.3 percent in New Mexico to 27.8 percent in California this year and from 14.8 percent in Colorado to 63.2 percent in California in 2012.

Although the U.S. economy showed uneven signs of growth in first quarter 2011—with increasing employment and slowing GDP growth—the Nevada economy continues to show signs of improvement. The state’s economic recovery is concentrated in the sectors on which the Nevada economy is most heavily reliant—gaming, hospitality and tourism. Mining, specialty construction and some business services are also making contributions. The housing and commercial real estate markets continue to see an overhang of vacant properties in most areas of the state, and a recovery in those sectors is still waiting for strong growth of the Silver State’s economic base to be reestablished.

u.s. economic growth slowed in First Quarter

The U.S. economy slowed noticeably in the first quarter, with real GDP growth dropping to 1.7 percent at an annualized rate—considerably weaker than the 3.1 percent figure posted for fourth quarter 2010. Despite evidence of weakening economic activity, U.S. nonfarm employment rose by a robust 244,000 jobs (seasonally adjusted) in April, marking the seventh straight month of job increases. In addition, retail sales and real personal consumption spending continued to rise in March. Sales of new homes also rose in March after a three-month downward slide. Sales of existing homes also rose in March after falling in February. Consumer confidence rose slightly in April, after falling in March. The Kansas City Financial Stress Index fell in April and remained below its long-run average, suggesting that the financial headwinds to U.S. economic growth remain low, Table 3.

nevada economy showing Definite signs of recovery

With U.S. consumption spending growing, the Nevada economy shows definite signs of recovery. In the first three months of 2011, visitor volume was higher than a year earlier. March gaming revenues were 5.1 percent above a year earlier, and taxable sales were up by 4.3 percent. Nevada employment rose by 10,500 jobs (1.0 percent) in

March, and the unemployment rate fell to 13.2 percent, Table 4.

clark county outpacing nevada in recovery

Clark County is setting a somewhat stronger pace of recovery than Nevada as a whole. Compared to a year earlier, March visitor volume was up by 5.2 percent, and gaming was up by 7.2 percent. In March, taxable sales were 3.2 percent above those for the same month a year earlier. Residential construction permits continued to rise through March. Las Vegas employment rose by 10,100 jobs (1.3 percent) in March, and the unemployment rate fell from 13.7 percent to 13.3 percent, Table 5.

Washoe county economic Activity Mixed

Washoe County’s economic indicators remain mixed in early 2011. Compared to a year earlier, March visitor volume was down by 10.8 percent while gaming was down by 7.1 percent. Residential construction permits continued rising in March. Reno-Sparks employment rose by 600 jobs (0.1 percent), and the unemployment rate notched downward to 13.1 percent, Table 6.

nevada economic outlook

With the national economy showing continued employment growth, the Nevada economy is showing modest signs of recovery—even with a downdraft in the overall pace of U.S. economic growth. The increasing willingness of U.S. businesses to hire should boost U.S. consumer confidence and spending and help stimulate economic growth in Nevada. Despite concerns that higher food and energy prices will slow the national economy and reduce discretionary spending, most of the news from Nevada’s tourism, gaming and hospitality sectors remains favorable. Nevada’s real estate and construction sectors are also showing some signs of life.

nevada economic conditions

issue 4 | ©Copyright 2011 - All Rights Reserved

nevADA econoMic conDitions

*Change in percentage rate**Reflects the Reno-Sparks MSA which includes Washoe and Storey Counties***Recent growth is an annualized rateSources: Nevada Department of Taxation; Nevada Department of Employment, Training, and Rehabilitation; UNR Bureau of Business and Economic Research; UNLV Center for Business and Economic Research; McCarran International Airport; Reno/Tahoe International Airport; Las Vegas Convention and Visitors Authority; Reno-Sparks Convention and Visitors Authority; U.S. Department of Commerce; U.S. Bureau of Labor Statistics; U.S. Census Bureau; U.S. Federal Reserve Bank.Note: NSA = Not Seasonally Adjusted, SA = Seasonally Adjusted

tabl

e 3 u.s. Date units current previous change year Ago change

employment 2011M4 million, sA 131.028 130.784 0.2% 129.715 1.0%unemployment rate 2011M4 %, SA 9.0 8.8 0.2% 9.8 -0.8%Consumer Price index 2011M4 82-84=100, NSA 224.4 223.5 0.4% 217.6 3.1%Core CPi 2011M4 82-84=100, NSA 223.7 223.3 0.2% 220.8 1.3%employment Cost index 2011Q1 89.06=100, SA 113.2 112.8 0.4% 111.4 1.6%Productivity index 2011Q1 2005=100, SA 112.6 112.4 0.2% 111.4 1.1%retail sales 2011M4 $billion, sA 389.355 387.371 0.5% 361.942 7.6%Auto and truck sales 2011M4 million, sA 13.13 13.07 0.5% 11.25 16.8%Housing starts 2011M3 million, sA 0.549 0.512 7.2% 0.634 -13.4%real GDP*** 2011Q1 2000$billion, SA 13,438.8 13,380.7 1.7% 13,138.8 2.3%u.s. Dollar 2011M4 97.01=100 95.543 97.143 -1.6% 101.763 -6.1%trade Balance 2011M3 $billion, sA -48.179 -45.439 6.0% -40.571 18.8%S and P 500 2011M4 monthly close 1,363.61 1,325.83 2.8% 1,186.69 14.9%Real Short-term Rates* 2011M4 %, NSA -0.13 -0.04 -0.1% 0.12 -0.2%treasury Yield spread 2011M4 %, NSA 3.40 3.31 2.7% 3.69 -7.9%

tabl

e 4 nevada Date units current previous change year Ago change

employment 2011M3 000 employees 1,114.4 1,103.9 1.0% 1,108.6 0.5%unemployment rate* 2011M3 %, NSA 13.2 13.6 -0.4% 14.9 -1.7%taxable sales 2011M2 $billion 2.924 3.009 -2.8% 2.804 4.3%Gaming revenue 2011M3 $million 958.73 881.83 8.7% 911.98 5.1%Passengers 2011M3 passengers 3.989 3.280 21.6% 3.907 2.1%Gasoline sales 2011M2 million gallons 79.63 89.76 -11.3% 80.71 -1.3%Visitor Volume 2011M3 million visitors 4.278 3.656 17.0% 4.127 3.7%

tabl

e 5 clark county Date units current previous change year Ago change

employment 2011M3 000 employees 803.4 793.3 1.3% 799.5 0.5%unemployment rate* 2011M3 %, NSA 13.3 13.7 -0.4% 15.1 -1.8%taxable sales 2011M2 $billion 2.174 2.252 -3.5% 2.106 3.2%Gaming revenue 2011M3 $million 835.68 769.53 8.6% 779.49 7.2%residential Permits 2011M3 units permitted 454 246 84.6% 740 -38.6%Commercial Permits 2011M3 permits 31 10 210.0% 13 138.5%Passengers 2011M3 million persons 3.637 2.978 22.1% 3.557 2.2%Gasoline sales 2011M2 million gallons 55.28 63.10 -12.4% 56.21 -1.7%Visitor Volume 2011M3 million visitors 3.730 3.160 18.0% 3.544 5.2%

tabl

e 6 Washoe county Date units current previous change year Ago change

employment** 2011M3 000 employees 187.5 186.9 0.3% 187.3 0.1%unemployment rate* 2011M3 %, NSA 13.1 13.2 -0.1% 14.5 -1.4%taxable sales 2011M2 $billion 0.359 0.374 -3.9% 0.371 -3.1%Gaming revenue 2011M3 $million 61.15 55.73 9.7% 65.85 -7.1%residential Permits 2011M3 units permitted 57 49 16.3% 31 83.9%Commercial Permits 2011M3 permits 5 11 -54.5% 9 -44.4%Passengers 2011M3 million persons 0.349 0.299 16.5% 0.347 0.5%Gasoline sales 2011M2 million gallons 12.41 13.45 -7.7% 12.79 -3.0%Visitor Volume 2011M3 million visitors 0.344 0.321 7.2% 0.386 -10.8%

This information is provided compliments of

Michael M. Lawson President and CeO Of COmmerCe real estate sOlutiOns

Mike Hillis, CCIM, SIOR managing Partner Of COmmerCe real estate sOlutiOns, las Vegas

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