Update: Southern NV economic trends

    Here are all the latest stats and graphs for the Las Vegas MSA. As always, don’t hesitate to contact RCG Economics chief John Restrepo at jrestrepo@rcg1.com with questions or comments.

    stat highlights

    positive

    employ index

    The RCG Employment Index’s 12-month moving average (“12MMA”) has now remained unchanged for 4 straight months, again holding at 98.7 through November. On a YOY basis, the Index is up 0.8 points from November 2016. After reaching 1.3 in June of this year, the YOY difference has fallen steadily as the Index remains stagnant. The Index is still 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 November 2017, making this the 4th month in a row that the rate remained unchanged. This is the longest streak seen since April 2011. The unemployment rate is 0.9 points below last October’s 6.0%. It reached its lowest level 11 years ago in October 2006 when it was just 4%. Southern Nevada is now hypothetically at “full employment.” We may be seeing the new normal in terms of unemployment post recovery.

    The 12MMA rate of job growth in the Las Vegas MSA was also unchanged, holding at 3.0%. 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.

    yoy construction

    Construction in the Las Vegas MSA continues to be boosted by a strong housing market AND a recovering commercial market. In November 2017 the number of Southern Nevada construction workers rose by 7,817 (12MMA) from November 2016, a 14.2% increase that puts total construction jobs at 62,775. That makes 65 straight months (over 5 years) and counting of construction job growth.

    Construction jobs represent 6.9% of the region’s job-base. The number of construction jobs today is well below the November 2006 peak of 108,833, when they accounted for 11.4% of all MSA jobs. Pre-recession construction job numbers, which were artificially inflated due to the real estate bubble, are not likely to return in the foreseeable future. That said, the region’s construction industry is much more stable today than it was then.

    visitor volume

    In November 2017 the Las Vegas MSA’s 12-month visitor count, on an annualized basis, was 42.3 million. This is down from the 42.4 million over the 12-month period ending in October 2017. The number of visitors to Clark County fell in November for the 6th month in a row, this time by -0.3%. When compared to November 2016, there was -1.4% YOY growth. This is the 4th month in a row YOY visitation has declined.

    After leading since the start of year, with November the visitor total for 2017 is now nearly even with that of 2016. The total visitor count through 11 months for both years is approximately 39.1 million. Visitor growth has slowed considerably in 2017 with a YOY visitor growth rate average through November of 0%. The average rate of growth over the same period in 2016 was much better at 2.8%. We believe we have now entered a sustained period of slower growth. The month of greatest YOY growth since the recession was September 2011, when visitor volume grew by 4.5%. We believe that the primary reason for the slowdown is a room capacity issue.

    convention attendance

    In November, Clark County’s annualized convention attendance saw a small gain from the previous month of 0.2%, reaching a new record high of 6.61 million attendees for the Las Vegas MSA over a 12-month period. Compared to November 2016, convention attendance is up 6.5%. The previous annualized peak attendance of 6.35 million was in January 2007.

    Convention attendance saw significant gains in 2016 with 10 months of greater than 10% YOY growth. However, YOY growth had been steadily slowing since the recent high in July 2016 of 20.2%. November 2017’s 6.5% YOY increase is the biggest of the year, but still smaller than every month of 2016. Demand growth is being limited by maxed-out capacities at Las Vegas’ various convention facilities. 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, which will allow the city to host more conventioneers.

    hotel rev

    In November 2017, the 12MMA of hotel revenue per available room (RevPAR) in Clark County was $114.71, a drop of $0.57 (-0.49%) from the previous month. Compared to November 2016, RevPAR is up $3.03 (2.7%), which continues its streak of YOY growth that began in December 2010. The RevPAR 12MMA had been nearing the peak of $119.43, which occurred in December 2007, but over the past three months it has been headed in the opposite direction.

    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 down -0.07% to 731.9 million in November, the second decrease after 8 straight months of growth. YOY growth in November of 3.0% was down (0.2 points) from the 12-month period ending in October. This makes 34 months straight of positive YOY growth. November’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 November, total (new and resales) Clark County home closings were up 0.39% from the previous month, reaching 11 straight months of positive growth on a 12MMA. Total sales surpassed last month’s peak of 4,914 and reached a new high of 4,933 sales. On a YOY basis total home sales were up 7.9%, the lowest YOY growth rate of 2017. New home sales had a YOY growth rate of 17.9% in November. Existing home sales also continue growing steadily with a YOY growth rate of 6.3%; not as rapidly as new homes but healthy growth, nonetheless.

    home price

    Per Home Builders Research, November’s 12MMA median home price (new and resale) was $241,284, a 0.94% gain over the previous month and a 9.7% gain over November 2016. The current median home price remains well below the peak of $305,333, which was recorded over 10 years ago in February 2007. November’s estimate is 79% of the peak price.

    The median new home price was again up 6.1% from the previous year, reaching a new peak in November of $340,694. The previous peak of $327,066 occurred in February 2007.

    The median resale home price was $222,992 in November, a 9.7% increase during the last 12 months. This was the biggest YOY increase since May of 2016. The peak of $286,833 occurred over 10 years ago in April 2007. This means that the current resale price has now recovered approximately 78% of its pre-recession peak. For comparison, the median resale home price in the Reno-Sparks MSA was over $100,000 higher at $333,151 (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 9%, averaging 7.9% for the year through November. The annual peak of 35.8% growth occurred in February 2005.

    30 yr fixed

    The 12MMA 30-year fixed rate mortgage in the Western Region was nearly unchanged, falling by just 0.02 points to 3.99% (12MMA) in December. This was the first dip in 14 months. 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 159.9 in October 2017, a rise of 7.3% compared to October 2016. The YOY growth rate has been picking up steadily since March of this year. The US index in October was again up 1.0, reaching 197.9, an increase of 5.8% for it compared to the previous year. The Las Vegas index peaked at 233.2 in December 2006. The latest LV index is 69% 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.

    commercial mortgage

    The 10-year U.S. Treasury rose 10 basis points from the end of November to 2.47%. The 30-Day LIBOR continues to increase as it rose nearly 20 basis points in December. The current rate of 1.56% is the highest level since the midst of the global financial crisis in 2008-2009. Approximately $350 trillion of financial products and loans are linked to LIBOR. As expected, the Federal Reserve increased its prime lending rate from 4.25% to 4.50%. The highly anticipated tax bill passed before the President’s Christmas deadline and will have broad effects on the economy and individual taxpayers. The stock market finished 2017 with significant gains; the DJIA up 25%, S&P 500 up 20%, and the NASDAQ up 29%. For the first time in its 90-year history, the S&P 500 posted positive total returns in every month of the calendar year.

    Interest rates remain favorable but continue their ascent, prompting many investors to acquire or refinance properties now.

    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 notably due to the volume of construction activity combined with vigorous visitor spending. Another record high was reached in October with over $3.44 billion in sales, a 3.8% increase from last year. The increase from the previous month was 0.20%. The YOY growth rate for taxable retail sales averages 4.3% through October.

    October’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: The Nevada Department of Taxation has just made public its marijuana tax revenue data. We have added a new chart to the Stat Pack tracking the monthly contribution of this new revenue source, to the extent it is reported by the Department

    weekly earnings

    The Las Vegas MSA’s 12MMA of average weekly earnings (not inflation-adjusted) went up by another $3 in November. This was the 4th month in a row nominal average weekly earnings rose by $3, continuing a steady streak of growth started just over 3 years ago in September 2014. On a YOY basis, the 12MMA was up $37 (5.0%) from November 2016.

    When considered on an inflation-adjusted, YOY basis, earnings rose by 2.8% in November 2017 compared to November 2016, reaching $669 (in 2007 dollars). This was an increase of $1 from October. Las Vegas’ average weekly real wage is now $82 (10.9%) below the most recent inflation-adjusted peak of $751 that occurred over 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, picked up another 0.1 points in November, reaching 33.9. Weekly hours have been climbing steadily, albeit slowly. On a YOY basis, average weekly hours are up 0.7 hours from November 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 nine years ago 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 0.6 hours.

    fuel

    As of January 4, Las Vegans saw the price of regular unleaded gasoline in the Las Vegas MSA decrease by $0.05 (-1.8%) from the month prior, resulting in a per gallon price of $2.62. The price of regular unleaded has gone up $0.22, or 9.3%, from a year ago.

    According to AAA, “Gas prices in the West Coast region remain among the most expensive in the country… According to EIA’s latest weekly report, the region’s refinery crude utilization rate hit a new record high at 96.3 percent, which is the highest level since the mid-2010s and well above the 80 percent rate seen at this time last year. In addition, gasoline inventories continue to measure above 30 million bbl. for a third week, positioning the region with a comfortable supply level as the year begins.” 

    pot tax

    Tax revenues generated from marijuana sales through the first four months are $19.1 million. The most readily available data report by the Nevada Department of Taxation contains retail and wholesale excise taxes. These taxes do not include sales and use taxes paid at point of sales at the dispensaries or the annual licensing fees paid by the industry. The wholesale excise tax is collected at a 15% rate from growers to dispensaries on medicinal- and recreational-use marijuana, while the 10% retail excise tax is charged to dispensaries’ recreational users. According to the Department, tax revenue from the sale of marijuana is expected to reach $120 million over 2 years. With tax revenue only expected to rise in the coming months, the state appears to be well on track to reach this goal. The major “know unknown” is if the U.S. Justice Department will go through with its threats of curtailing or putting a halt to the industry’s activities.

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