An improving economy has generated nearly $60 million above revenue estimates for Nevada’s state government in recent months, according to figures released by the state’s Economic Forum.
The Economic Forum, which provides the revenue projections lawmakers are required to use in creating the state’s budget, revealed that tax collections were more than $21 million above the Forum’s estimates for the last few months of Fiscal Year 2011, which ended on June 30. The state’s economy has also generated just under $38 million more in tax revenue than predicted in the first five months of FY 2012.
In the past, state government gobbled up and spent additional revenues, which was partly responsible for massive increases in expenditures during boom years. It is up to us, the taxpayers, to make sure the state does not repeat that mistake in the current recovery.
According to participants in the Forum, a slow but noticeable recovery is taking place in Nevada. With one notable exception, the presenters appeared cautiously optimistic about the state’s economic future.
Bill Anderson, chief economist of the Department of Employment, Training and Rehabilitation, indicated that employment has been picking up in the state. September and October actually saw increases in the total number of jobs. 15,000 new jobs were created in the Leisure and Hospitality industry in the past year.
However, the state still leads the nation in unemployment at 13.4%, which is far worse than the state with the second-highest unemployment rate (11.4% in California). Even more sobering are that the unofficial unemployment rate (including people who are no longer looking for work and part-time workers who would rather be full-time) is around 23% and that over half of those unemployed have been out of work for more than a half-year.
The future does look a little better but the hole that state is in is very deep. Anderson said he “expects relatively modest improvements going forward” but no new boom. He predicts job growth of about 1% per year and the unemployment rate dropping by around 1 percentage point for each of the next few years.
Stephen Brown from UNLV’s Center for Business and Economic Research stated the Southern Nevada economy is improving and predicted slow growth for the next couple years.
Brown disclosed the Indices of Leading Economic Indicators were up and that the Center’s Southern Nevada Business Confidence Index revealed, “Southern Nevada businesses are more confident than they’ve been in the history of this index,” although he stated the index is only four years old.
This index samples business sentiment in five areas – sales, profits, hiring, capital expenditures and economic conditions. For the first time all areas were above the neutral 100 mark into optimistic territory.
Brown presented several elements used to develop the Southern Nevada Forecast – visitor volume, gross gaming revenue, hotel/motel rooms, population, employment, unemployment, total personal income and housing units permitted – all of which he predicts to move in a positive direction in each of the next two years. He predicted the Southern Nevada economy will “show slow growth in 2012 and 2013.”
Perhaps the most optimistic of all was Rossi Ralenkotter of the Las Vegas Convention and Visitors Authority who presented the visitor and tourism statistics for the Las Vegas market.
These numbers have improved in virtually every area. Ralenkotter indicated that, at the current pace, visitor volume would exceed 39 million. 2007 was the only year in which Las Vegas achieved 39 million visitors. And even a modest increase in 2012 might be enough to reach the magical 40 million figure.
The most dour report came from Dennis Smith, President of Home Builders Research, who provided the Southern Nevada housing outlook. Not a pretty picture.
The homebuilding industry was hit harder than any other by the recession. After new home closings reaching a peak of nearly 39,000 in 2005, the number fell by over 7% in 2006.Closings fell by nearly half the next year, nearly half again the next and nearly half again to just 5,271 in 2009. After a slight increase in 2010, new home closings fell by 1/3 this year with Smith projecting just 3,600 closing in 2011. Smith predicts modest increases in the next couple years.
Meanwhile, new home prices have remained relatively stable for the last year. Smith indicated this is because builders have reached the bottom limit of what they can afford to build a house for. While existing home prices may fall further , although Smith didn’t believe this was likely because of the already-large spread between new and existing home prices, builders of new homes have run out of areas in which to cut costs.
The Northern Nevada contingent revealed the Reno-Sparks Metropolitan Statistical Area (MSA) the area had 2,000 fewer jobs in October 2011 than October 2010, which itself had 3,400 fewer than October 2009. Four of the thirteen sectors included in the study suffered job losses during this time.
They also indicated that the fifteen rural counties, despite containing 80,000 fewer residents, actually generated more taxable sales than Washoe County in the last 4 quarters. However, taxable sales in Washoe County increased in the third quarter of 2011, although by only 0.8%, far less than in Clark County or the state of Nevada as a whole.
The economy does appear to be picking up and there are reasons for optimism, though the construction industry is a notable exception to that optimism. As the economy improves, tax collections should continue to exceed estimates.
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