Southern Nevada:

As Issues Persist, Leaders try Keeping up with Roaring Economy

As Southern Nevada leaders take stock of community and socio-economic issues, they are also trying to keep up with an economy that shows no signs of slowing down as local fundamentals outpace—and are increasingly tied to—the national economy more than ever before.

That’s according to a handful of recent local economic forecast events from March – May, including the Las Vegas Global Economic Alliance’s (LVGEA) “Perspective” conference; the Annual Interface Conference Group’s “Las Vegas Multifamily” conference; and The Economic Club of Las Vegas’s “Las Vegas in the 2020s” conference. The keynote speakers’ opinions spotlight intriguing viewpoints, trends and projections so your credit union can plan appropriately.

Southern Nevada
Presented at the LVGEA’s 2019 “Perspective” conference:

The combined Las Vegas and Southern Nevada economy is poised to continue growing well into 2020 (and possibly 2021) as local fundamentals suggest no recession is imminent. How fast the local economy grows over the next 12 – 24 months is the question in point. While some national experts predict the U.S. economy may dodge a recession in 2020, they aren’t ruling out a slowdown in economic growth. The “flavor” of this potential impending slowdown could impact Southern Nevada differently than other regions across the state and nation (although local experts argue that the area is much more economically prepared and diversified today than it was 10 years ago).

Today, the Las Vegas region’s economy is much more economically tied to the fate of the United States economy than ever before. The Las Vegas regional economy’s growth metrics continue to outperform Nevada and the United States, especially in population growth and job growth. Going into 2020, the region should continue outperforming the state and nation in almost every major category of economic prosperity—even if the broader economy forces local, state and national fundamentals to all slow down relative to each other. It doesn’t mean Southern Nevada isn’t immune to socio-economic issues, “but jobs and employment growth are still the key element of it all,” said Jeremy Aguero, keynote conference speaker and principle analyst at Applied Analysis. “We are at the lowest level ever of local people filing unemployment insurance claims in Southern Nevada,” he added, citing the 9,400 claims in 2018 versus 36,400 in 2009 and 15,100 in 2000. “And we have about two times the number of employees today than back in 2000.”

What’s driving Southern Nevada’s economic growth right now? Migration of out-of-state residents combined with job growth and positive business fundamentals. In fact, the “current problem” is many local companies can’t find workers to fill open positions—a phenomenon stirring in several metropolitan and suburban regions across the nation right now. This issue could actually be “holding back” economic growth, Aguero said. Even as the Las Vegas region has benefitted from 97 consecutive months of employment growth, this trend doesn’t show any signs of falling in the near future. “Also, economic diversification and investment is driving the entire state of Nevada in elevating the bar with respect to jobs, wages and salaries,” he said.

Contributing to the Las Vegas region’s booming economy is the entire state’s economy. Nevada has ranked in the top-five job growth states every year nationwide from 2013 – 2019 (YTD), and also ranked No. 1 specifically within the past two years. This comes after ranking No. 50 each year from 2008 – 2010 during and after the Great Recession (but also ranking No. 1 from 2003 – 2005 when local construction employment made up 12 percent of all jobs, which was double from today’s 6 percent). Also, Nevada job growth outpaced the United States at double the nation’s rate from early 2018 – early 2019. Over the past 12 months, Nevada’s top-three job growth sectors were construction (12,600 new jobs), professional/business services (9,700 new jobs), and manufacturing (5,600 new jobs). All other employment categories experienced positive growth except one (mining and logging at -100 job losses). Total job additions were 44,300—an exceptional 3-percent yearly growth rate when compared to other states and the nation.

Nationally speaking, “As more time goes on, the recession doesn’t show up—and we continue to push back our predictions for a recession,” Aguero said regarding national economists and other experts. “And the reason for that is because no one truly knows.” Leading U.S. economic indicators combined (indicator index) reveals the nation’s economy stands at its best level it’s ever experienced in modern history (includes metrics on population, employment, average weekly earnings, the unemployment rate, personal income, Gross Domestic Product, 30-year fixed mortgages rates, mortgage delinquencies, and the S&P 500 stock market level/adjusted closing price). This much-watched index has hit a record “112” (after its last record peak of 103 in 2006).

Additionally, businesses nationwide are currently investing more in equipment, productivity, and in their future than any other point in U.S. history. This amounts to $1.26 trillion per quarter in gross private domestic investment—outdoing the past peak records in 2007 and 2000. But just because economic indicators have risen extensively doesn’t mean a recession is imminent. This economy “needs to be viewed in the right context,” Aguero said. “And that context is: right now the economy is firing on all cylinders. We are not so out of line, or in a ‘bubble,’ that the economy is set up to collapse.”

Three issues to watch “locally” in Southern Nevada as the U.S. economy continues growing beyond many experts’ expectations: 1) aging demographics and the fact that the “prime working-age adult population” (ages 25 – 54) has increasingly shrunk over the long-term (even though the Millennial cohort now makes up the largest share of total U.S. population); 2) corporate business debt as a percentage of annual GDP, which is at the highest levels ever experienced in modern U.S. history; and 3) federal government debt as a percentage of annual GDP, which also stands at a record-high 105 percent. This very last issue (government debt) is the largest long-term issue hanging over the economy, even though many experts agree it doesn’t pose enough downside risk to plunge the current economy into a recession.

Click here to view video of the entire conference, starting with keynote economic speaker Jeremy Aguero’s presentation at the 1:13:42 time mark. You can also view his slide presentation here. Other insightful speakers made their presentations before Aguero on the video. However, Aguero discusses Southern Nevada trends in population growth, migration patterns, demographic trends, employment, business activity, economic fundamentals, residential profiles, home sales and prices, housing inventory and market breakdown, new and existing home activity, household income, residents by age group, generational activity, family formation patterns, educational patterns, voter registration breakdown, and share of racial diversity.

Click here to view the Las Vegas "Perspective" 2019 Community Survey. It examines the opinions and attitudes of the region’s workforce, which provides residents, community leaders and businesses actionable insight into issues that matter most to community and economic development. It covers the local business environment, education, transportation, infrastructure, community, government, and demographics.

Click here to view a commercial real estate presentation by CBRE’s Global Gaming Group: "How Will Las Vegas Change in the 2020s? The Roaring 20s' Returns!". It includes trends and questions to consider regarding local population forecasts, large commercial real estate projects, land issues, corridor infrastructure, "ifs and maybes,” and notable projects. This was made during the “Las Vegas in the 2020s” segment of The Economic Club of Las Vegas’s recent March outlook conference.

Las Vegas Real Estate Trends and Projections
Based on surveys and other analysis, the latest comprehensive report published by the Urban Land Institute and consulting firm PWC (“Emerging Trends in Real Estate”) reveals the following Las Vegas real estate characteristics:

Las Vegas experienced one of the largest declines in retail real-estate space across the nation from 2007 – 2018 as the Great Recession transitioned into a new “e-commerce” era. Out of the top 19 metropolitan areas, the city ranked No. 3—going through a 2.6 per-capita decrease in retail square feet during that period (versus Denver, CO at No. 1 and Jacksonville, Fl at No. 2). While several other metropolitan areas are in the top 19 list, the U.S. average was 0.8 per-capita decrease in retail square feet.A new equilibrium… is being established as the amount of space devoted to malls, shopping centers and retail districts declines, with unneeded retail space being repurposed or replaced,” the report states.

The Las Vegas region’s “homebuilding prospects” recently rated No. 24 out of the top 79 U.S. real estate markets. The top metropolitan areas ranked as follows: Nashville, TN (No. 1); Tamp/St. Petersburg, FL (No. 2); Austin (No. 3)—and the list goes on.As the economy and real estate expansion prepare to stretch into another year, the real estate market does not feel the need to get overly defensive and move into markets that are often perceived as safe havens in a down market,” the report states. “In fact, the opposite is true to a certain extent.”

The Las Vegas region’s five-year projected annual median home-price growth for “existing” housing (2019 – 2023) is 1.9 percent. Assuming some potential economic fluctuations (recession and growth periods), the region’s median housing appreciation is still expected to register growth as more individuals migrate inward from surrounding states—although this figure is a huge slowdown from the latest annual growth over the past few years.

From an investor standpoint, the Las Vegas industrial real estate market, space, activity and potential ranks No. 9 on the latest top-20 U.S. industrial markets. About 64 percent of investor survey respondents gave a “buy” rating on local industrial space in the region, versus 21 percent giving a “hold” rating and only 14 percent saying fellow investors should “sell.”

Las Vegas ranks No. 4 in the entire Mountain West region with respect to the strength of its local economy and other variables affecting commercial and residential real estate markets. These also include real-estate investor demand, capital availability, development and redevelopment opportunities, public/private investments, and local community development. Las Vegas was only beat out by Denver (No. 1), Salt Lake City (No. 2), and Phoenix (No. 3).Focus groups for Las Vegas, Boise, Spokane, WA and Coeurd’Alene, ID mention that their metro areas could benefit from increased infrastructure investment, but that they also continue to see rising interest from national and regional investors,” the report states.

Nevada Forecast
The Nevada Economic Forum—a yearly public-private partnership mandated by the state government—recently released its economic forecast and snapshot in its "Report to the Governor and the Legislature on Future State Revenues". This report provides guidance for the state’s biennial budget cycle.  

Besides commentary and data from experts on Nevada’s general fund, breakdown of revenue, and a review of local and state taxes, the report also covers the following areas: economic overview, growth projections, future indicators, and trends in the statewide and national labor force, wages, household income, housing, population, interest rates, inflation, jobs, consumer spending and more.

Demographic Profile and Projections: Clark County

  • Total population: 2.22 million (and will hit 2.5 million by 2025). 
  • Working-age individuals (15 - 64 years old): 66 percent of total population in 2015 (and will fall to 63 percent by 2025). 
  • Labor force (at least 16 years old who are working/looking for a job): 1.12 million out of 1.78 million adult population. 
  • Labor force participation rate (adults who “want” to work): 63 percent (or 1.12 million individuals). 
  • Unemployment rate: 3.8 percent (versus 4 in NV and 3.6 in U.S.)  
  • Unemployed workers: 42,000
  • Median household income: $57,200 as of 2018 (compared to $58,000 for NV and $60,300 for U.S.) 
  • Poverty rate: 14.6 percent (versus 14.2 in NV and 13.4 in U.S.) 
  • Education of population (age 25 years or older): 20 percent have a college degree; 29 percent some college; 25 percent high school diploma; and 26 percent no high school diploma. 
  • Data as of January 2019 from the Nevada Department of Taxation; Nevada Demographer’s Office; Nevada Department of Employment, Training and Rehabilitation; Center for Business and Economic Research at the University of Nevada Las Vegas; Federal Reserve Bank of St. Louis; U.S. Bureau of Economic Analysis; and U.S. Census Bureau

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