The Stat Pack
The RCG Employment Index’s 12-month moving average (“12MMA”) has been steadily increasing since 2011. June 2017 continues the trend with our Index ticking up by 0.1 and reaching 98.6. Compared to June 2016, the Index is up 1.3 points. It is now just 1.4 points below the November 2006 peak of 100. We expect the Index will continue on the same trajectory that we have been seeing since 2011.
The 12MMA of Clark County’s headline unemployment rate was 5.2% in June 2017. The unemployment rate has been falling by 0.1 points every month for more than a year. That puts the rate 1.2 points below last June’s 6.4%. It reached its lowest level in October 2006 when it was just 4%. The region is hypothetically at “full employment”.
The 12MMA rate of job growth in the Las Vegas MSA has not changed in 7 months, holding firm at 3.3% in June. Job growth in the region and at the national level is suffering from the same effect: According to the Brookings Institution, the slowdown is mainly due to decreasing demand for unskilled labor.
The U-3 and U-6 unemployment rates for Nevada saw healthy improvement in the 2nd quarter of 2017. The U-3 rate was down 0.6 points, from 5.6 to 5. The U-6 rate fell from 11.9% in Q1 to 11.5% in Q2. Despite the 0.4-point drop in the U-6 rate, Nevada still has the third highest U-6 rate in the nation, beating only New Mexico and Alaska.
In terms of the U-3 rate, Nevada is doing better than 13 other states, a considerable change from its previous ranking of 6th highest U-3 rate in the nation.
A strong housing market AND a recovering commercial market are bolstering construction in Las Vegas, leading to more construction jobs. There were 58,642 construction workers in Southern Nevada in June 2017 (12MMA), up 5,350 (10.0%) from June 2016. That makes 60 straight months (5 years) and counting of construction job growth. These jobs now represent 6.5% of the region’s job-base. June’s jobs are still well below the November 2006 peak of 108,833, when they accounted for 11.4% of all MSA jobs. However, we are not likely to see the pre-recession construction job share in the foreseeable future. While the number of construction jobs was pushed to an artificial high during the real estate bubble, the industry is much more stable today than it was then.
On a 12MMA basis, the number of visitors to Clark County in June fell -0.2% from the previous month. However, when compared to June 2016, there was positive YOY growth of 0.3%. 2017’s six-month visitor total of 21.4 million is still slightly higher than 2016’s 21.3, but the differential has been shrinking. Visitor growth has slowed considerably in 2017 with a YOY visitor growth rate average over the first half of the year of only 0.6%. The average rate of growth over the same period in 2016 was better at 1.7%. We believe we are now in a sustained period of slower but steady growth. The month of greatest YOY growth since October 2005 was September 2011, when visitor volume grew by 4.5%.
In June, Clark County’s monthly convention attendance (on a 12MMA basis) fell -0.18% to 523,890 attendees from 524,838 the previous month. Compared to June 2016, convention attendance was up 1.1%. The 12MMA monthly peak attendance of 529,185 was in January 2007. June’s attendance represented 99% of the peak.
Convention attendance saw significant growth in 2016 with 10 months of greater than 10% YOY growth. However, YOY growth has been steadily slowing since the recent peak in July 2016 of 20.2%. This is primarily due to facility capacity issues controlling the demand growth. This June 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.
In June 2017, the 12MMA of hotel revenue per available room (RevPAR) in Clark County was $114.79, a decrease of -$0.07 (-0.06%) from the previous month. Compared to June 2016, RevPAR is up $6.64 (6.1%), which continues its streak of YOY growth that began in December 2010. It now represents 96% 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.
On a 12MMA basis gaming revenue net of baccarat was up for the 4th month in a row with an increase of 0.15% from this past May to $722.9 million in June. YOY growth in June of 3.9% was down slightly from the 12-month period ending in May, but maintains a 29 month streak of positive YOY growth. June’s gaming revenues net of baccarat were nearly 87% 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. Slot revenues continue to recover for two reasons: constrained disposable income, which is now finally improving, and changing spending patterns, especially among adults under 35. Millennials prefer to spend their money at clubs, pool parties, restaurants, show experiences and shopping rather than gambling.
According to Home Builders Research, in June, total (new and resales) Clark County home closings, numbering 4,753 (12MMA), were up .94% from the previous month. On a YOY basis, total home sales were up by 8.2% compared to June 2016. New home sales continue their hot streak with YOY growth of 21.2%, the 5th month in a row that new home sales annual growth has been over 20%. Existing home sales are not nearly as strong with YOY growth of 6.2%. Total home sales are closing in on the most recent monthly peak in July 2012 of 4,777 sales. June’s count was 99.5% of the peak.
Per Home Builders Research, the 12MMA median home price (new and resale) in June 2017 was $229,991, a 7.5% gain over June 2016. The peak of $305,333 was recorded just over 10 years ago in February 2007. April’s estimate was 75% of the peak price.
The median new home price was up 4.3% from the previous year, reaching a new peak in June of $330,274. The previous peak of $327,066 occurred in February 2007.
The median resale home price was $211,724 in June, a 7.2% 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 74% of its pre-recession peak. By comparison, the median resale home price in the Reno-Sparks MSA was $317,356 (12MMA).
Toward the end of 2016 the combined rate of home appreciation for new and resale homes declined from an average 10.1% YOY growth during the first four months to 6.4% in December of that year. It grew slightly to start off 2017 and over the last four months has held above 7%. The annual peak of 35.8% growth occurred in February 2005.
The 12MMA 30-year fixed rate mortgage in the Western Region increased by .06 points to 3.78% in July after holding at 3.73% over the previous two 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.
The 12MMA Case-Shiller home price index for the Las Vegas MSA reached 154.6 in May 2017, a rise of 6% compared to May 2016. The US index in May was 193.2. The Las Vegas index peaked at 233.2 in December 2006. The latest index is 66% of the peak. 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.
The 10-year treasury fell to a low of 2.24% in late July, after rising to 2.39% near the beginning of the month. The 30-Day LIBOR remained primarily unchanged, ending the month .01% higher than June’s finish of 1.22%. Treasury yields declined last month as investors increased their holdings in government paper. The rise comes amid persistent doubt about the President’s pro-growth policy agenda and the failure to garner enough support to repeal and replace the Affordable Care Act. Furthermore, the U.S. Federal Reserve left the benchmark policy rate unchanged this month as Janet Yellen emphasized that she expects to begin shrinking its $4.5 trillion bond portfolio later this year. Finally, Andrew Bailey of the Financial Conduct Authority reported that the LIBOR will be phased out by the end of 2021. The FCA said a lack of transaction data meant it was no longer possible to determine a reliable rate.
The LIBOR continues to slowly rise while the 10-year U.S. Treasury oscillates near 2.3%. With Treasury Yields remaining relatively stable, it is still a good time to borrow and lock in a long term fixed rate.
Source: CommCap Advisors.
Despite slowing visitor growth, increased local resident and business spending in Nevada and Clark County continues to see rising taxable retail sales. We believe much of this growth is due to the volume of construction activity in the market today. Another record high was reached in May with $3.41 billion in sales, a healthy 5% increase from last year. Over these first five months of the year the YOY growth rate for taxable retail sales is generally trending upward.
May’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.
The number of average weekly hours worked in Las Vegas (Clark County), on a 12MMA basis, remained at 33.5 in June, a pause in the plodding general trend of increasing hours. On a YOY basis, average weekly hours are up 0.4 hours from June 2016. The 7-year peak of 36.9 hours occurred in October 2008. Weak average hours worked continue to be accompanied by a declining headline unemployment rate. In Q2-2017, the U-6 unemployment rate recorded another 0.4 point drop, which may be an indication that business reliance on part-time workers is decreasing.
Implication: Despite decreasing headline and U-6 unemployment rates, 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 11.5% as of Q2, 2017.
As of July 31, the price of regular unleaded gasoline in the Las Vegas MSA fell $.04 (-1.7%) from the month prior, resulting in a per gallon price of $2.55. Compared to this time last year, the price of regular unleaded is $0.13, or 5.0%, more.
According to AAA, “After notching the biggest one-week draw in nearly two and a half years, West Coast gasoline stocks are at their lowest level in seven months. Stocks tumbled 1.7 million bbl, bringing the region’s supply level to nearly 27 million bbl, according to the EIA. The tumble in stocks paired with potentially lower West Coast refinery runs, due to ongoing maintenance this week, means the regional decline in gas prices could be short lived and gas prices have the potential to increase in the coming days.”
Electric meter hookups’ 12MMA in June 2017 reached 803,084. Total hookups were up 1.8% from June 2016. Over the last 20 months the annual growth rate for electric meter hookups has slowly fluctuated between 1.7% and 1.9%. This hints at stable population growth and business growth, and household formations in the Valley. The annual peak growth rate occurred March 1990 at 10.5%.
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 increased 0.1 points from 1.7 in May to 1.8 in June on a 12MMA basis. When compared to June 2016 the E-P Ratio is down 0.1 points from 1.9. The general consensus among real estate analyst 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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