Nevada's Economy April 2012
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Nevada's Economy April 2012

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    Nevada's Economy April 2012 Nevada's Economy April 2012 Document Transcript

    • A monthly report produced for Commerce Real Estate Solutions by Stephen P. A. Brown, PhD, Center for Business & Economic Research University of Nevada, Las VegasIssue 16 April 2012 To receive this newsletter by e-mail, please subscribe at www.comre.com/subscribeThe Changing Nature ofLas Vegas TourismThe Southern Nevada economy is largely defined by tourism. A region’s economic base is madeup of the industries that produce the goods and services the region provides to the rest of theworld. According to data from the U.S. Bureau of Labor Statistics, the Clark County economicbase comprises leisure and hospitality and air and ground transportation services, the latterundoubtedly the result of tourism.With strong population growth, the construction and and hospitality employment with overall Californiareal estate industry also stood out as an important aspect employment.of the Southern Nevada economy until about 2007. The relative stability of the leisure and hospitalityDespite its strong contributions, however, construction industry is not surprising. Whatever sectors areand real estate cannot be considered part of a region’s doing well in the U.S. economy generate the incomeeconomic base. Its output is not exported to the rest necessary to support tourism, gaming and hospitality.of the world. What drives construction and real estate As one of the premiere tourist destinations in the world,is the region’s growth—which is mostly dependent on Las Vegas can always share in others’ fortunes.the strength of the industries in its economic base. Las Vegas Visitor Volume RisingTourism and Gaming As of March, Clark County saw 23 consecutiveFrom 1990 through 2007, the growth of Clark County months of increased tourism. In 2011, Clark Countygross gaming revenue outpaced U.S. economic activity. visitor volume was 3.6 percent higher than in 2010. ForClark County gaming revenue dropped more sharply the first three months of 2012, Clark County visitorduring the U.S. recession than overall U.S. economic volume averaged 3.2 percent higher than the sameactivity, as was the case in previous recessions. Given time period in 2011. For Clark County visitor volumethe depth of the U.S. recession, it’s not surprising that to reach the high water mark of 43,915,649 set in 2007,gaming revenue has been a little slow to rise. we need to see a 4.2 percent increase over 2011. ThatEmployment in Las Vegas leisure and hospitality probably will not happen in 2012.outpaced overall U.S. employment from 1990 through2007. Since then, employment in Las Vegas leisure This report is commissioned byand hospitality has basically held its own with overall Commerce Real Estate Solutions info@comre.com • 801-322-2000national employment. So employment in the industryhas been more stable than gaming revenue. We seea similar picture when comparing Las Vegas leisure
    • nevada’s Economy April 2012The visitor picture is stronger for Las Vegas. Las Vegas Staying Longer; Paying Higher Room Ratesvisitor volume is approaching the levels seen in 2007 During 2011, the average visitor to Las Vegas stayedbefore the U.S. recession. In 2011, Las Vegas visitor longer than in 2010. Room nights occupied rose by 5.3volume was 4.3 percent higher than in 2010. For the percent. That figure exceeds the gain in visitor volumefirst three months of 2012, Las Vegas visitor volume by 1.0 percentage points. During the first three monthsaveraged 3.6 percent higher than for the same period of 2012, however, visitor volume was 3.6 percent higherin 2011. For Las Vegas visitor volume to reach the high than during the same period in 2011, but room nightswater mark of 39,196,761 set in 2007, we need to see were only 3.0 percent higher. Room nights occupiedonly a 0.7 percent increase over 2011. That is quite were 5.4 percent higher during the first three monthslikely to happen in 2012. of 2012 than during the same period in 2007 beforeLas Vegas tourism is changing as it recovers. Visitors the recession.are coming from farther away, staying longer and Visitors are also paying higher room rates than they didpaying higher hotel rates than in recent years. Visitors in 2010. During 2011, room rates were 10.7 percentalso seem to be gambling less and purchasing less from higher than during the same period in 2010. Duringthe retail shops in the casinos. the first three months of 2012, room rates were 3.6Visitor Composition Has Changed percent higher than during the same period in 2011.Visitors came from farther away in 2011 than in Despite the gains, room rates during the first threeprevious years. A higher percentage of Las Vegas months of 2012 were 16.8 percent below the rates seenvisitors are arriving by air. Passenger volume at Las in the first three months of 2007.Vegas’ McCarran airport, including those passing Gambling Lessthrough, was 4.4 percent higher in 2011 than in 2010. During the recovery, gaming revenue has risen by lessDuring the first three months of 2012, passenger than visitor volume, but that is changing. During 2011,volume was 3.0 percent higher than in the first three Clark County gross gaming revenue was 3.5 percentmonths of 2011. higher in 2010—0.1 percentage points less than theThe slow economic recovery in the West has been gain in Clark County visitor volume. During the firstevident in the changing composition of visitors. The three months of 2012, Clark County gross gamingnumber of visitors arriving by automobile declined by revenue was 4.4 percent higher than in the first three0.5 percent in 2011. The number of people arriving months of 2012, while visitor volume was only 2.1at the California-Nevada border was up by only 0.3 percent higher. Despite the recent gains, Clark Countypercent.In early 2012, however, we saw resurgence inautomobile traffic, despite higher gasoline prices. Thenumber of visitors arriving by automobile during thefirst three months of the year was 0.5 percent higherthan for the same period in 2011. The number arrivingat the California-Nevada border was up by 7.5 percent.One consequence of more visitors arriving by air isincreased taxicab ridership. During 2011, Las Vegastaxi ridership was 7.3 percent higher than in 2010 and1.6 percent higher than in 2007. During the first threemonths of 2012, taxicab ridership was 3.9 percenthigher than in the same period in 2011.Commerce Real Estate Solutions | comre.com
    • The Changing Nature of Las Vegas Tourismgross gaming revenue was 10.5 percent lower during The Slow U.S. Recovery Seen in Las Vegas Tourismthe first three months of 2012 than in the same period In short, the tourist-dependent Las Vegas economyin 2007. continues to see the effects of a slow U.S. economicFocusing on the Las Vegas Strip yields a more recovery. In first quarter 2012, U.S. gross domesticfavorable picture. During 2011, gross gaming revenue product (GDP) remained 5.4 percent below potential,at establishments along the Las Vegas Strip was 5.1 and in April 2012, U.S. employment was 3.6 percentpercent higher than in 2010—0.8 percentage points below the high-water mark set in January 2008. Givenhigher than the gain in Las Vegas visitor volume. the slow U.S. recovery, the recent gains in SouthernSimilarly, gaming revenue along the Strip was 5.2 Nevada tourism and gaming have been impressive.percent higher in the first three months of 2012 than For Southern Nevadans, one important question isduring the same period in 2011—1.6 percentage points how do the gains in tourism and gaming translatehigher than the gain in Las Vegas visitor volume. into employment? Although we are seeing gains,Nonetheless, gross gaming revenue along the Las employment in the Las Vegas leisure and hospitalityVegas Strip was 7.0 percent lower during the first three sector has not quite reached the levels establishedmonths of 2012 than during the same period in 2007. in 2007. Continued gains in tourism and gaming should mean increased employment in the leisure and hospitality industry.Nevada Economic ConditionsU.S. economic growth showed a substantial slowing in and 5.2 percent higher than a year earlier, respectively.first quarter 2012. Consumer spending and inventory Personal consumption expenditures increased for theinvestment remained fairly strong, but government ninth straight month in March, and retail sales rose inspending, business fixed investment and net exports March for the tenth straight month. The Kansas Citymade negative contributions. Nevada’s tourism and Financial Stress Index remained below its long-rungaming industries continue to drive the state’s economic average in April, which suggests financial headwindsrecovery. Nevada’s construction sector remains at are not impeding economic growth. The quantity ofrelatively low levels. Rising employment and reduced commercial paper outstanding remains low, whichlabor force participation meant a lower statewide means that relatively little external financing is beingunemployment rate in March. used to support business investment, Table 1.U.S. Economy Shows Slowing Growth Story continues after graphsU.S. real GDP grew at an annualized rate of 2.2 percentduring first quarter 2012, representing a substantialslowing from the fourth-quarter rate of 3.0 percent.Consumer spending and inventory investment drovemost of the gains. Residential investment also continuedto show improvement. Government spending, businessfixed investment and net exports made negativecontributions. U.S. nonfarm employment rose byonly 115,000 jobs in April, marking the weakest gainsince August 2011. The unemployment rate fell to 8.1percent in April, as labor force participation dropped.Consumer sentiment increased slightly in April, butconsumer confidence slipped slightly. Sales of new andexisting homes slipped in March, but were 7.5 percent Issue 16 | ©Copyright 2012 - All Rights Reserved
    • nevada’s Economy April 2012 U.S. Date Units Current Previous Change Year Ago ChangeTable 1 Employment 2012M04 million, SA 132.989 132.874 0.1% 131.173 1.4% Unemployment Rate 2012M04 %, SA 8.1 8.2 -0.1% 9.0 -0.9% Consumer Price Index 2012M03 82-84=100, NSA 229.1 228.4 0.3% 223.2 2.6% Core CPI 2012M03 82-84=100, NSA 228.4 227.9 0.2% 223.4 2.3% Employment Cost Index 2012Q1 89.06=100, SA 115.3 114.7 0.5% 113.2 1.9% Productivity Index 2012Q1 2005=100, SA 110.6 110.7 -0.2% 110.1 0.5% Retail Sales 2012M03 $billion, SA 408.0 404.8 0.8% 382.1 6.8% Auto and Truck Sales 2012M03 million, SA 14.31 15.04 -4.8% 13.02 9.9% Housing Starts 2012M03 million, SA 0.654 0.694 -5.8% 0.593 10.3% Real GDP*** 2012Q1 2000$billion, SA 13,502.4 13,429.0 2.2% 13,227.9 2.1% U.S. Dollar 2012M04 97.01=100 99.026 98.727 0.3% 95.361 3.8% Trade Balance 2012M03 $billion, SA -51.825 -45.416 14.1% -46.059 12.5% S and P 500 2012M04 monthly close 1,397.91 1,408.47 -0.7% 1,363.61 2.5% Real Short-term Rates* 2012M04 %, NSA -3.12 -3.82 0.7% -4.54 1.4% Treasury Yield Spread 2012M04 %, NSA 1.97 2.09 -0.1% 3.40 -1.4% Nevada Date Units Current Previous Change Year Ago ChangeTable 2 Employment 2012M03 000 employees 1,122.6 1,113.9 0.8% 1,113.8 0.8% Unemployment Rate* 2012M03 %, NSA 11.9 12.2 -0.3% 13.5 -1.6% Taxable Sales 2012M02 $billion 3.223 3.154 2.2% 2.924 10.2% Gaming Revenue 2012M03 $million 854.59 932.17 -8.3% 958.73 -10.9% Passengers 2012M03 passengers 4.000 3.418 17.0% 3.990 0.2% Gasoline Sales 2012M02 million gallons 83.72 85.12 -1.6% 79.63 5.1% Visitor Volume 2012M03 million visitors 4.377 3.821 14.6% 4.278 2.3% Clark County Date Units Current Previous Change Year Ago ChangeTable 3 Employment 2012M03 000 employees 806.1 799.8 0.8% 803.4 0.3% Unemployment Rate* 2012M03 %, NSA 12.1 12.2 -0.1% 13.7 -1.6% Taxable Sales 2012M02 $billion 2.416 2.332 3.6% 2.174 11.1% Gaming Revenue 2012M03 $million 733.49 812.14 -9.7% 835.68 -12.2% Residential Permits 2012M03 units permitted 841 460 82.8% 450 86.9% Commercial Permits 2012M03 permits 23 18 27.8% 32 -28.1% Passengers 2012M03 million persons 3.655 3.108 17.6% 3.565 2.5% Gasoline Sales 2012M02 million gallons 57.89 59.50 -2.7% 55.28 4.7% Visitor Volume 2012M03 million visitors 3.836 3.326 15.3% 3.722 3.1% Washoe County Date Units Current Previous Change Year Ago ChangeTable 4 Employment** 2012M03 000 employees 186.9 185.9 0.5% 186.0 0.5% Unemployment Rate* 2012M03 %, NSA 12.0 12.2 -0.2% 13.5 -1.5% Taxable Sales 2012M02 $billion 0.398 0.397 0.3% 0.359 10.7% Gaming Revenue 2012M03 $million 61.43 60.26 1.9% 61.15 0.4% Residential Permits 2012M03 units permitted 42 42 0.0% 57 -26.3% Commercial Permits 2012M03 permits 9 4 125.0% 5 80.0% Passengers 2012M03 million persons 0.293 0.265 10.5% 0.349 -16.0% Gasoline Sales 2012M02 million gallons 13.10 13.02 0.7% 12.41 5.6% Visitor Volume 2012M03 million visitors 0.333 0.314 6.1% 0.352 -5.4%*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 EconomicResearch; UNLV Center for Business and Economic Research; McCarran International Airport; Reno/Tahoe International Airport; Las VegasConvention 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 AdjustedCommerce Real Estate Solutions | comre.com
    • Nevada Economic ConditionsNevada Economy Continues to Show Uneven Washoe County’s Economy Showing SluggishGrowth GrowthThe Nevada economy continues to show uneven signs of Washoe County’s economy continued to show sluggishgrowth. Visitor volume was 2.3 percent higher in March growth. Reno-Sparks employment rose by 1,000 jobsthan a year earlier. Gaming revenue was 10.9 percent (0.5 percent) from February to March. The Reno-lower in March than a year earlier. Declines were seen Sparks unemployment rate fell from 12.2 percent inin slot machine play and most table games. Taxable February to 12.0 percent in March. Compared to asales were 10.2 percent higher in February than a year year earlier, March visitor volume was down by 5.4earlier. Statewide employment increased by 8,700 jobs percent. Gaming revenues were up by 0.4 percent over(0.8 percent) in March. The Nevada unemployment the same period. Residential construction permits heldrate decreased from 12.2 percent in February to 11.9 steady in March, and commercial construction permitspercent in March as the result of employment gains rose from extremely low levels, Table 4.and reduced labor force participation, Table 2. Nevada Economic Outlook in BriefClark County’s Economy Also Showing Uneven Although consumer spending and inventory investmentGrowth were strong in first quarter, the pace of nationalClark County’s economy also shows uneven signs of economic growth slipped. Employment growth slowedgrowth. Compared to a year earlier, visitor volume in April. Southern Nevada’s tourism and hospitalitywas up by 3.1 percent in March. Gaming revenue continue to grow, but gaming fell off the pace inwas 12.2 percent lower in March than a year earlier. March, and other sectors are not contributing much.Declines were seen in slot machine play and most table In Washoe County, some favorable employment signsgames. Taxable sales for February were 11.1 percent were seen in March. Nevada’s construction shows signsabove those for a year earlier. Residential construction of improving from very low levels.permits rose sharply from February to March, andcommercial construction permits increased from alow level. The region’s employment rose by 6,300 jobs(0.8 percent) from February to March. The Las Vegasunemployment rate fell slightly, from 12.2 percent inFebruary to 12.1 percent in March, Table 3. Issue 16 | ©Copyright 2012 - All Rights Reserved
    • This information is provided compliments of Michael M. Lawson President and CEO of Commerce Real Estate Solutions Commerce Real Estate Solutions Mike Hillis, SIOR, CCIM 3980 Howard Hughes Parkway, Suite 100 Las Vegas, NV 89169 Managing Partner of Commerce Real Estate Solutions, Las Vegas Tel (702) 796-7900 • Fax (702) 796-7920 www.comre.com To receive this newsletter by e-mail, please subscribe at www.comre.com/subscribe This report has been prepared solely for information purposes. It does not purportCommerce is a regional real estate firm with international ties, to be a complete description of thededicated first and foremost to our clients. With the industry’s markets or developments contained inpremier professionals, and industry leading technology, our mission this material.is to exceed our clients’ expectations through service excellence. The information contained in this report,For further information on the Nevada commercial real estate while not guaranteed, has been securedmarket, visit www.comre.com or call 702-796-7900. from sources we believe to be reliable.