The Stat Pack
This month continues an economic trend with no end in sight: The rate of job growth is holding steady, which is to say that growth is not increasing. Bottom line, Southern Nevada job growth is suffering a bit because of an increasing demand for unskilled labor. You’ll see below that job growth in the Las Vegas MSA did not change in February, holding at 3.3% (12MMA). The national growth level is suffering from the same effect. The reasons are many, including the rapid advancement of automation and technology.
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In each of the previous 6 months the RCG Employment Index 12-month moving average (“12MMA) has ticked up by 0.1 points, arriving in February at 98.0. Compared to February 2016, the Index is up 0.9 points. For nearly 6 years the Index has been steadily climbing and is now 2 points below the November 2006 peak of 100. One of the main reasons for the weakness of this February’s numbers is that last February was a leap year, leaving us one day less to rack up numbers in 2017.
After dropping 0.2 points to start the year in January, the 12MMA of Clark County’s headline unemployment rate did not budge in February. When compared to February 2016, the headline rate is down by 0.8 points. The rate reached its lowest level in October 2006 when it was just 4%.
The rate of job growth in the Las Vegas MSA did not change in February, holding at 3.3% (12MMA). Job growth in Las Vegas 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.
Construction jobs in the Las Vegas MSA continue growing at a steady pace as housing and commercial real estate demand are healthy. Construction workers in Southern Nevada numbered 55,983 in February 2017 (12MMA), up 4,017 jobs (7.7%) from February 2016. Construction employment has now grown for 55 straight months and represented 6% of the region’s job-base at the end of February. February’s jobs are still far below the November 2006 peak of 108,833 when they accounted for 11.4% of all MSA jobs. It is unlikely we will see those pre-recession construction job share in the foreseeable future as it was artificially inflated due to the real estate bubble, though this also means that the industry is more stable today than it was then.
On a 12MMA basis, Clark County visitor volume in February was down from the previous month, shrinking by -0.43%, after January’s weak 0.09% increase. When compared to February 2016, the YOY visitor count was up 0.5% in February 2017. 2017’s two month visitor total of 7.15 million is only slightly higher than the previous year’s total of 7.10 million over the same two months. The month of greatest YOY growth since October 2005 was September 2011, when visitor volume grew by 4.5%.
After decreasing by -0.51% in January, Clark County’s monthly convention attendance increased by 0.20% in February (on a 12MMA basis) to 517,120. Compared to February 2016, convention attendance is up 4.7%. The 12MMA monthly peak attendance of 529,185 was in January 2007. February’s attendance represented 98% 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 getting smaller since the recent peak in July 2016 of 20.2%. This is likely because convention attendance has now recovered to a stable level.
The 12MMA of hotel revenue per available room (RevPAR) in Clark County was $113.86 in February 2017, a decrease of -$0.39 (-0.34%) from the previous month. Compared to February 2016, RevPAR is up $7.06 (6.6%) and continues on its streak of YOY growth that began in December 2010. It is now 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.
Gaming revenue net of baccarat decreased slightly from January by -0.14% to $711.7 million in February 2017 on a 12MMA basis. YOY growth in February was 1.7%. February’s gaming revenues net of baccarat were 85% 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 remain lackluster for two reasons: constrained disposable income and changing spending patterns, especially among adults under 35. Millennials are preferring to spend their money on the clubs, restaurants and show experiences rather than gambling.
According to Home Builders Research, in February, total (new and resales) Clark County home closings, which numbered 4,620 (12MMA), were up 0.62% from the previous month. On a YOY basis, total home sales were up by 8.7% compared to February 2016. Resales saw a YOY increase of 6.8% to 3,934, while new homes sales shot up by 20.8% to 686. This was the 20th straight month of increasing YOY new home sales after 14 months of declines and the 17th straight month of YOY gains of over 10%. Total home sales are not far from the most recent monthly peak in July 2012 of 4,777 sales. February’s count was 97% of the peak.
Per Home Builders Research, the 12MMA median home price (new and resale) in February 2017 was $223,144, a 6.6% gain over February 2016. The peak of $305,333 was recorded 10 years ago in February 2007. February’s estimate was 73% of the peak price.
The median new home price in February was $325,369, up 4.2% from the previous year. The peak of $327,066 occurred in February 2007. This means that the current median new home price has recovered to 99.5% of its pre-recession peak.
The median resale home price was $205,232 in February, a 6.2% increase during the last 12 months. The peak of $286,833 was in April 2007. This means that the current resale price has recovered 71.6% of its pre-recession peak. For comparison, the median resale home price in the Reno-Sparks MSA was $308,450 (12MMA).
The combined rate of home appreciation for new and resale homes had slowed considerably in mid-2015, but then started to accelerate again. At the end of 2016 home appreciation again began slowing down and for the first 2 months of 2017 YOY growth was 6.6%. In February 2016, the YOY price increase from 2015 was 10.2%. This is 3.6 percentage-points more than the 2017 figure. The annual peak of 35.8% growth occurred in February 2005.
The 12MMA 30-year fixed rate mortgage in the Western Region increased slightly by 0.04 points to 3.58% in March after a 0.01-point decrease the previous month. Though small, this is the first increase after 11 straight months of steady decrease. The 10-year peak of 6.4% occurred in October 2006. The 30-year fixed rate mortgage should remain relatively low, but will likely to go up because of Federal Reserve actions.
The 12MMA Case-Shiller home price index for the Las Vegas MSA reached 151.3 in January 2017, a rise of 5.8% compared to January 2016. The index peaked at 233.2 in December 2006. The latest index is 65% of the peak, making the region a competitive housing market. The greatest positive annual change (44.5%) in the 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.
Q4 of 2016 is the 7th quarter in a row that the Housing Opportunity Index (“HOI”) for the Las Vegas MSA has improved after 7 quarters of decline, reaching 67.7 points on a 4-quarter moving average basis or 79% of its peak. It changed from 67.0 in Q3, 2016 to 67.7 in Q4, 2016. The Las Vegas HOI peaked at 86.2 in Q1, 2012. It bottomed out at 15.4 in Q1, 2007 at the height of the housing boom. The 10-year average is 66.6.
The U.S. index dropped from 62.9 in Q3, 2016 to 62.1 in Q4, 2016. Housing prices nationally appear to be stabilizing.
The HOI is based on the share of homes sold that are affordable to a family earning the median income in Clark County, assuming standard mortgage underwriting criteria.
The Las Vegas Valley’s 12MMA apartment vacancy rate continues to decline gradually, from 7.8% in Q3, 2016 to 7.7% in Q4. This was a 0.6-point drop compared to Q4, 2015. 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. The region’s apartment market could be moving toward a supply-constrained market in some areas if this downward vacancy trend continues.
As of April 3, 2017, the prime rate remained at 3.5%. The 10-year treasury bond rate fell by 0.07 points to 2.42%. The 30-day LIBOR increased by 0.22 points to 0.98%. Lender rates are expected to shift upward, yet they remain relatively low and continue to benefit the commercial real estate industry in terms of the cost of borrowing. The challenge: filling the excess capacity, especially in the office market, when job growth is moderate and companies remain hesitant about expanding their space footprint.
Increased visitation and increased local resident and business spending in Nevada and Clark County pushed taxable retail sales to a new record highs in 2016, but the YOY change is slowing as the local economy reflects uncertainty due to national and global trends. Sales hit $3.35 billion in January 2017, up 4.3% compared to January 2017 on a YOY basis using a 12MMA.
Current 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 budgets. Steadily improving local, regional and national job markets are key to this improvement. This is especially true regarding the regional and national job markets since they are primary drivers of tourism spending in the region.
The Las Vegas MSA 12MMA for average weekly earnings (not inflation-adjusted) in February 2017 was up another $2 after January’s $5 jump, reaching $752. The 12MMA is up $23 (3.1%) from February 2016. On an inflation-adjusted, YOY basis, earnings increased 1.6% in February 2017 compared to February 2016 to $655 (in 2007 dollars). Las Vegas’ average weekly real wage is now $96 (12.9%) below the most recent inflation-adjusted peak of $751 that occurred 9 ½ years ago in August 2007. The trough occurred in February 2012 at just over $616, so Las Vegas is still much closer to the trough than the peak.
After 6 straight months at 33.2, the number of average weekly hours worked in Las Vegas (Clark County), on a 12MMA basis, ticked up to 33.3 to kick off 2017. However, the improvement was short-lived as it stalled again in February. On a YOY basis, average weekly hours are up 0.1 points from February 2016. The 7-year peak of 36.9 hours occurred in October 2008. As we’ve noted, weak average hours worked have been accompanied by a slowly declining headline unemployment rate. In Q4-2016, the U-6 unemployment rate recorded a 0.3 point drop, so we may finally be seeing the expected increases in weekly hours worked.
Implication: Companies continue to depend heavily on part-time workers. For this reason, Nevada’s U-6 unemployment rate (including discouraged and part-time workers), though declining, remains among the nation’s highest at 12.2% as of Q4, 2016.
As of April 3, the price of regular unleaded gasoline in the Las Vegas MSA continues to rise with a $0.09 (3.5%) increase from the month prior, resulting in a per gallon price of $2.62. Compared to this time last year, the price of regular unleaded is $0.17, or 7%, more.
According to AAA, “Gas prices on the West Coast remain the highest in the country, with six states in the region topping the list of most expensive U.S. markets: Hawaii ($3.05), California ($2.98), Washington ($2.86), Alaska ($2.78), Oregon ($2.72) and Nevada ($2.66).
Although the increase in prices has been moderate, it is possible this trend could continue as refinery maintenance wraps up, more expensive summer-blend gasoline becomes available and driving demand increases this spring.”
Electric meter hookups’ 12MMA in February 2017 reached 798,231. Total hookups were up 1.7% over February 2016. The annual growth rate has been steady for the last 18 months. This hints at stable population growth and household formations in the Valley. The annual peak growth rate occurred March 1990 at 10.5%.
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