Southern Nevada Economic Metrics

    Following is all the latest data for the Las Vegas Metro Statistical Area. Don’t hesitate to email Stat Pack co-publisher and RCG Economics Principal John Restrepo with questions at jrestrep0@rcg1.com.

    stat highlights

    positive

    emp index

    The RCG Employment Index’s 12-month moving average (“12MMA”) remained unchanged through September, making this the 2nd time in 4 months the Index did not change. On a YOY basis, the Index is up 1.1 points from September 2016. It continues 1.3 points below the November 2006 peak of 100.

    job growth

    The 12MMA of Clark County’s headline unemployment rate held at 5.1% in September 2017, making this the 2nd out 4 months that the rate remained unchanged. The last time this happened was over a year ago in April 2016. The unemployment rate is 1 point below last September’s 6.2%. It reached its lowest level in October 2006 when it was just 4%. Southern Nevada is now hypothetically at “full employment”.

    After 2 straight months at 3.2%, the 12MMA rate of job growth in the Las Vegas MSA fell 0.1 points to 3.1%. Job growth at the regional and national levels has been suffering from the same effect: According to the Brookings Institution, the slowdown is mainly due to decreasing demand for unskilled labor.

    u3

    The U-3 unemployment rate, or headline rate, for Nevada saw its first uptick since Q2, 2016, rising by the same amount it did then: 0.2 points. The U-3 rate now sits at 5.2%, or 0.6 points above the average rate for 2007, the year the Great Recession hit. The U-6 rate fell just 0.1 points from 11.5% in Q2 to 11.4% in Q3, the smallest improvement in the U-6 rate since Q2 of 2015. Nevada’s U-6 rate is still the third highest in the nation, beating only New Mexico and Alaska. As shown in the chart, the spread between the two rates is generally tightening, indicating that wage increases will continue to solidify.

    In terms of the U-3 rate, Nevada slipped several places in Q3 and now has the 7th highest headline rate in the nation. In Q2 it was beating 13 other states.

    yoy construction

    A strong housing market AND a recovering commercial market continue to bolster development in Las Vegas, leading to more construction jobs. In September 2017 the number of Southern Nevada construction workers rose by 6,842 (12MMA) from September 2016, a 12.6% increase that puts total construction jobs at 61,133. That makes 63 straight months (just over 5 years) and counting of construction job growth.

    Construction jobs now represent 6.7% of the region’s job-base. September’s jobs are still well below the November 2006 peak of 108,833, when they accounted for 11.4% of all MSA jobs. However, the number of construction jobs was pushed to an artificial high during the real estate bubble. We are not likely to see those pre-recession construction job numbers in the foreseeable future. That said, the region’s construction industry that is much more stable today than it was then.

    visitor volume

    On a 12MMA basis, the number of visitors to Clark County in September fell -0.21% from the previous month. When compared to September 2016, there was -0.8% YOY growth. This is the second month in a row of a drop YOY visitation. 2017’s nine-month visitor total of approximately 32.1 million remains a bit higher than the same period in 2016 of 32 million, with the differential continuing to shrink. Visitor growth has slowed considerably in 2017 with a YOY visitor growth rate average through September of only 0.3%.

    The average rate of growth over the same period in 2016 was much better at 3%. We believe we have now entered a sustained period of slower growth. The month of greatest YOY growth since October 2005 was September 2011, when visitor volume grew by 4.5%.

    convention attendance

    In September, Clark County’s convention attendance (on a 12MMA basis) saw a -1.01% monthly decrease, dropping from last month’s record high of 540,568 attendees for the Las Vegas MSA to 535,111. Compared to September 2016, convention attendance is still up 1.1%. The previous 12MMA monthly peak attendance of 529,185 was in January 2007.

    Convention attendance saw significant gains in 2016 with 10 months of greater than 10% YOY growth. However, YOY growth has been steadily slowing since the recent high in July 2016 of 20.2%. This is primarily due to facility capacity issues controlling the demand growth. The good news: In June 2017, the Las Vegas Convention and Visitors Authority’s Board of Directors gave final approval for an expansion and renovation of the Las Vegas Convention Center.

    hotel rev

    In September 2017, the 12MMA of hotel revenue per available room (RevPAR) in Clark County was $115.55, a drop of just $0.02 (-0.02%) from the previous month. Compared to September 2016, RevPAR is up $4.35 (3.9%), which continues its streak of YOY growth that began in December 2010. RevPAR is nearing a new high, now representing 97% of the RevPAR 12MMA peak of $119.43, which occurred in December 2007.

    Note: RevPAR is a performance metric in the gaming and lodging industry. It is computed by dividing a resort’s or hotel’s room revenue by the room count and the number of days in the period being measured.

    gaming rev

    On a 12MMA basis gaming revenue net of baccarat was up for the 7th month in a row with an increase of 0.21% to $732.7 million in September. YOY growth in September of 4.4% was down (0.2 points) from the 12-month period ending in August. This makes 32 months straight of positive YOY growth. September’s gaming revenues net of baccarat were nearly 88% of the October 2007 peak of $834.4 million.

    The net baccarat revenues are largely comprised of slot revenues, which generally reflect wagering of typical gamblers, especially U.S. gamblers. While changing spending patterns among millennials under 35 have caused a decrease in slot revenues, they are now recovering because there has finally been some improvement with the issue of constrained disposable income.

    home sales

    According to Home Builders Research, in September, total (new and resales) Clark County home closings were up 0.22% from the previous month, surpassing last month’s peak of 4,848 sales and reaching a new high of 4,858 sales (12MMA). On a YOY basis total home sales were up 9.2%. While new home sales are still doing remarkably well with YOY growth of 18.1%, this was the first time in 8 months the growth rate was under 20%. Existing home sales also continue growing steadily with a YOY growth rate of 7.8%; not as rapidly as new homes but healthy growth, nonetheless.

    home price

    Per Home Builders Research, the 12MMA median home price (new and resale) in September 2017 was $236,604, a 1.04% gain over the previous month and an 8.8% gain over September 2016. The peak of $305,333 was recorded over 10 years ago in February 2007. September’s estimate is just over 77% of the peak price.

    The median new home price was up 5.6% from the previous year, reaching a new peak in September of $336,719. The previous peak of $327,066 occurred in February 2007.

    The median resale home price was $218,408 in September, an 8.8% increase during the last 12 months. The peak of $286,833 occurred over 10 years ago in April 2007. This means that the current resale price has recovered approximately 76% of its pre-recession peak. By comparison, the median resale home price in the Reno-Sparks MSA was $326,147 (12MMA).

    The rate of home appreciation for new and resale homes most recently peaked in March 2016 at 10.2% YOY growth, but was down to 6.4% in December of that year. Since then it has risen steadily and is now back up over 8%, averaging 7.5% for the year through September. The annual peak of 35.8% growth occurred in February 2005.

    30 yr mtg

    The 12MMA 30-year fixed rate mortgage in the Western Region increased by 0.04 points to 3.88% in October, continuing a general upward trajectory initiated in December of 2016. The 10-year peak of 6.4% occurred in October 2006. The 30-year fixed rate mortgage should remain relatively low, but will likely go up because of Federal Reserve actions.

    case shiller

    The 12MMA Case-Shiller home price index for the Las Vegas MSA reached 157.5 in August 2017, a rise of 6.6% compared to August 2016. The US index in August was also up, reaching 195.9, an increase of 5.6% for it compared to the previous year. The Las Vegas index peaked at 233.2 in December 2006. The latest index is 67% of the peak. Both indexes have been on the rise since 2012. The greatest positive annual change (44.5%) in the Las Vegas index occurred in March 2005, while the greatest negative change (-31.8%) occurred in August 2009. These trends are similar to those reported by Home Builders Research.

    apartment vacancy

    The Las Vegas Valley’s 12MMA apartment vacancy rate dropped 0.1 points in Q3 2017, the same amount it gained the previous quarter. The general trend since 2011 has been down. Apartment vacancies are slowly recovering. Over the last 9 years, the apartment vacancy rate peaked at 10.8% in Q2, 2010. It hit its lowest mark of 5.1% in Q1, 2007.

    commercial mtg

    Markets are currently being driven by the expected changes in European monetary policy, President Trump’s announcement of his nominee for chair of the Fed board, and policy maker’s view on the health of the U.S. and global economy. Treasury yields moved as high as 2.47% in October, the highest since March. At the heart of the move was speculation that President Trump’s pick for Fed chair could be Stanford University economist John Taylor (we now know he has nominated Jerome Powell). Additionally, The European Central Bank is expected to reduce the amount of bonds it is buying in its quantitative easing program. U.S. rates take their cue from Europe and yields on German bonds have also been moving higher. On November 1, Federal Reserve officials voted unanimously to leave interest rates unchanged while signaling they remain on track to hike once more this year.

    With rising rate indexes and an impending federal funds rate hike on the horizon, motivated investors continue to search for opportunities to place capital in commercial real estate.

    taxable retail

    Despite slowing visitor growth, increased local resident and business spending in Nevada and Clark County continues to steadily fuel rising taxable retail sales. We believe much of this growth is due to the volume of construction activity combined with vigorous visitor spending. Another record high was reached in August with over $3.42 billion in sales, a 4.1% increase from last year. The increase from the previous month was 0.29%. The YOY growth rate for taxable retail sales averages 4.4% through August.

    August’s taxable sales are the highest ever recorded by the State of Nevada on a nominal basis (not inflation-adjusted). As such, they have boosted local and state government revenues and spending. Steadily improving local, regional and national job markets are key to this improvement. This is especially true regarding the health of regional and national economies, which have driven Southern Nevada’s growth, benefiting all of its sectors. They are also primary drivers of visitors and convention attendance to Las Vegas, which is ultimately reflected in tourism spending in the region.

    Note: It will be interesting to see how adult-use marijuana sales will pan out relative to the taxes they will generate. The first of month of reporting occurred this July, but there has been a delay in releasing the data to the public. While still small relative to Nevada’s revenue-base, we will begin tracking the contribution that these sales are making to the base as soon as the data are available, likely next month.

    weekly earnings

    The Las Vegas MSA’s 12MMA of average weekly earnings (not inflation-adjusted) went up by $3 for the second month in a row, continuing a steady streak of growth started precisely 3 years ago in September 2014.  On a YOY basis, the 12MMA was up $35 (4.8%) from September 2016.

    When considered on an inflation-adjusted, YOY basis, earnings rose by 2.6% in September 2017 compared to September 2016, reaching $666 (in 2007 dollars). This was an increase of $1 from August. Las Vegas’ average weekly real wage is now $85 (11.3%) below the most recent inflation-adjusted peak of $751 that occurred 10 years ago in August 2007. The trough occurred in February 2012 at just over $616, so Las Vegas remains much closer to the trough than the peak.

    weekly hours

    The number of average weekly hours worked in Las Vegas (Clark County), on a 12MMA basis, stalled at 33.7 in September after 2 consecutive months of 0.1 point increases. Weekly hours had been climbing by 0.1-points every 2 months from January to July, so we may see a return to this pattern with an increase next month. On a YOY basis, average weekly hours are up 0.5 hours from September 2016, a good sign considering they were either down or unchanged YOY through all of 2016. In Q3-2017, the U-6 unemployment rate recorded a 0.1 point drop, which suggests that business reliance on part-time workers continues decreasing. The 7-year peak of 36.9 hours occurred in October 2008.

    Implication: Despite a decreasing U-6 unemployment rate, many companies continue to depend heavily on part-time workers and independent contractors. For this reason, Nevada’s U-6 unemployment rate (including discouraged and part-time workers) remains the nation’s 3rd highest at 11.4% as of Q3, 2017. However, the decreasing U-6 rate does seem to be having a salutary effect on weekly hours. In 2016, the net gain in weekly hours was 0. Already in 2017 weekly hours have increased 0.5 hours.

    fuel

    As of November 6, Las Vegans saw the price of regular unleaded gasoline in the Las Vegas MSA decrease by just a penny (-0.6%) from the month prior, resulting in a per gallon price of $2.67. The price of regular unleaded has gone up $0.18, or 7.2%, from a year ago.

    According to AAA, “Moving into the week, the West Coast continues to lead the U.S. among most expensive markets. Six of the top ten most expensive markets in the country are found in this region: California ($3.21), Hawaii ($3.17), Alaska ($3.09), Washington ($2.94), Oregon ($2.79) and Nevada ($2.73) 

    In the EIA’s latest report, total gasoline stocks are below 28 million bbl, reaching a seven-week low at 27.6 million bbl. Additionally, EIA’s report showed that the refinery utilization rate of crude fell to 81.4 percent from 81.9 percent last week, which means less gasoline is being produced. With demand remaining high and supplies tightening in the region, prices are also being pushed up by these supply and demand factors.”

    emp permit

    A well-known housing market indicator is the employment-to-housing permit ratio, or E-P Ratio. It compares monthly job growth to the number of housing permits issued during the same month. The E-P Ratio for Clark County is down 0.4 points from last month, the biggest drop since November 2016, from 1.6 in August to 1.2 in September on a 12MMA basis. Relative to September 2016 the E-P Ratio is down 0.9 points from 2.1. The general consensus among real estate analysts is that an E-P Ratio between 1.0 and 2.0 indicates a stable market. Clark County’s E-P Ratio has been in this range since October 2016.

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