The Stat Pack
In December 2018 the RCG Employment Index’s 12-month moving average (“12MMA”) remained at 98.8, holding at the strongest 12MMA the Index has measured for the second month in a row. On a YOY basis the Index is up 0.4 points from December 2017.
The 12MMA of Clark County’s headline unemployment rate held steady in December at 4.8%, after slowly trending downwards for months. That’s also 0.5 points below December 2017’s 5.3% 12MMA. This metric reached its lowest level (4%) more than 11 years ago in October 2006.
The 12MMA rate of job growth in the Las Vegas MSA increased 0.1 points to 3.2% in December. There was also an increase in 12MMA job growth YoY, a 0.3 point rise from December 2017’s 2.9%. The 12MMA job growth rate has now risen for the sixth straight month, a good economic sign.
The U-3 unemployment rate, or headline rate, for Nevada, continued its downward trend, ticking down another 0.1 points in Q4 to 4.5%. The U-3 rate is now lower than the average rate for 2007 (4.6%), the year the Great Recession hit. Along with this drop in the U-3 rate, the U-6 rate, which measures underemployment, saw a slight increase from 9.4% to 9.5%. Quick note, the U-6 rate has historically been about twice the U-3 rate.
In terms of the U-3 rate, Nevada is still 0.6 points higher than the national average of 3.9%. While the U-6 rate saw some improvement, the national average of 7.6% is still 1.7 points lower than Nevada’s rate.
Construction in the Las Vegas MSA continues to be boosted by a still relatively healthy for-sale and for-rent housing market, improving (particularly industrial) commercial markets, large scale “special use” projects like the Raiders’ stadium and Las Vegas Baseball Park, casino-resort renovations and public infrastructure investments especially transportation projects. This said, 2019 is expected to be a bellwether year.
In December 2018, the number of Southern Nevada construction workers rose by 6,550 (12MMA) from December 2017, an 11.1% jump. On a 12MMA, basis, November’s statewide gains put total construction jobs at 91,658. That marks 78 straight months (more than 6 years) of job growth. President Trump’s uneven approach to trade, including steel tariffs, is affecting the Las Vegas construction industry.
Construction jobs this November represented 6.6% of the region’s job-base. During the real estate bubble of 2000-2007, construction jobs accounted for as much as 11.4% of all MSA jobs, with construction jobs peaking at 108,833 in November 2006.
The Las Vegas MSA’s 12-month visitor count (annualized) in December 2018 was just over 42.1 million. The number of visitors to Clark County grew 0.17% in December, lower than November’s 0.43%. On a YOY basis, this was the 17th consecutive month of annualized visitation decline, though that decline is now under a point: down just 0.2% since December 2017. We believe that the primary reasons for the slowdown are: limited room capacity, the strong dollar making vacationing in the US pricier for foreign visitors, the rising cost of visiting Las Vegas and a move back to the longer trend rate of growth.
There were 42.2 million visitors to the Las Vegas MSA in 2017, compared to 42.9 million in 2016. The total visitor volume in 2018 was 42.1 million.
In December, Clark County’s annualized convention attendance saw a 1.02% decrease from the previous month, dropping to 6.50 million. That’s also 2.5% less than the 12MMT of December 2017 of 6.66 million, which was the annualized peak, though the numbers are trending higher.
Convention attendance saw significant gains in 2016, with 10 months above 10% YOY growth. Through all of 2017 the YOY rate of growth had fallen sharply to 3.9%. Over the course of 2018, attendance grew by an average of 2.0% YOY. 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. The expansion is expected to be completed by 2022.
In December 2018, the 12MMA of hotel revenue per available room (RevPAR) in Clark County was $113.54, a gain of $1.01 (0.9%) from the previous month, the third straight month of growth for the metric. This is a full $.76 above December 2017’s RevPAR, ending 9 straight months of YOY (current month vs. same month in previous year) decline. The RevPAR 12MMA peak of $119.43 occurred in December 2007. This is a metric to definitely watch.
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 dollars grew in December 2018 to $753,602,667, a gain of 0.65% from November. The streak of positive YOY growth continues, reaching 47 consecutive months with an increase of 2.4% from December 2017. Net baccarat revenues are over 90% of the October 2007 peak of $834.4 million.
The net baccarat revenues are largely comprised of slot revenues, which generally reflect wagering by typical gamblers, especially U.S. gamblers. While changing spending patterns among millennials have caused a decrease in slot revenues, they are now recovering as US household disposable income has increased.
Of the 4,953 total Las Vegas MSA home sales recorded by Home Builders Research in December, 4,066 were resales and 887 were new home sales. According to Home Builders Research, total (new and resale) Clark County home closings, on a 12MMA basis, dropped 1.02% in December, compared to the previous month. On a YOY basis, total home sales were 0.4% higher than in December 2017.
The 12MMA for new home sales saw a YOY growth rate of 15.3% in December, while existing home sales saw a decrease for the third straight month, dropping 2.3%.
Per Home Builders Research, December’s 12MMA median home price (new and resale) was $278,986, a 0.90% gain over the previous month. Compared to December 2017, the price is up 14.1%, dropping after three months at the highest point for the metric since September 2014. YOY growth had been rising steadily for 18 months, but is well below the YOY peak of 35.8% recorded in February 2005. The current overall median home price remains well below the February 2007 peak of $305,333. November’s figure is over 91% of the peak price.
The median new home price was up 9.4% from December 2017, setting a new peak for the 20th consecutive month at $375,917. The previous cycle peak of $327,066 occurred in February 2007.
The median resale home price was $257,575 in December, a 14.0% jump from a year earlier. The peak of $286,833 occurred more than 11 years ago in April 2007. The resale average has now recovered more than 89% of its pre-recession peak price.
The combined rate of home appreciation for new and resale homes continued to hold steady in December. The YOY growth had dropped to 6.4% in December 2016 but rose steadily in the 2nd half of 2017, averaging 9.2% YOY growth over the last 6 months of the year. Over the course of 2018, the YOY growth rate averaged 13.6%.
These figures are not inflation-adjusted, or “real.” Therefore, the real value of homes today compared to the pre-recession peak is overestimated.
This new chart tracks monthly nominal Total Sales Volume (“TSV”) for housing. The data series starts in August 2001 and goes through latest available month. TSV is calculated by multiplying monthly closings by the respective median new, resale and weighted/combined home prices. We’d like to note that the three median home prices are based on monthly moving averages (“12MMA”). This is done to account for seasonality in prices. The TSVs’ 12MMAs in December 2018 were: $334.1 M for new homes, $1,048 M for resales and $1,382 M for the combined total. Clearly, the upward trajectory is quite pronounced especially for resales because of their greater availability, leading to more competitive prices. New home TSV is being affected by rising construction and land costs.
On a percent change basis, December TSVs were up 0.8% for new homes, but dropped by 0.6% for resales and 0.2% for combined. Compared to December 2017, the percent changes in TSVs were 25.9% for new, 11.2% for resales and 14.4% for combined.
As point of reference, the Peak TSVs occurred in July 2006 ($1,043B-new), January 2006 ($1,335B-resales) and March 2006 ($2,326B-combined). Monthly TSVs are now 32.0% of the peaks for new home sales, 78.5% for resales and 59.4% for total combined sales
The 12MMA 30-year fixed-rate mortgage for the US continues to climb. An increase of 0.04 points in January over the previous month puts the rate at 4.58% (12MMA). This was the 12th consecutive increase in the rate. The 12-year peak of 6.4% happened in October 2006. While the 30-year fixed rate should remain relatively low, it will likely continue to go up because of Federal Reserve actions.
The 12MMA Case-Shiller home price index for the Las Vegas MSA rose by 1.7 points to 181.5 in November 2018, growing 12.5% compared to November 2017. The Las Vegas index has risen for 75 straight months, while the YOY growth rate has increased steadily since March 2017. November’s U.S. 12MMA index was up another 0.8 points to 210.8 a jump of 6.0% compared to the previous year.
The Las Vegas index peaked at 233.2 in December 2006, with the latest index reaching 77.8% of that 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.
November’s taxable retail sales continue to rise in Clark County, with 0.95% growth to $3.66 billion from the month prior. On a YOY basis, growth in the 12MMA increased to 6.4% over November 2017. We believe much of the dollar growth in taxable sales is due to rising credit card usage by local residents, healthy visitor spending numbers and strong construction activity.
The consistent growth of taxable sales has given local and state governments more money to work with. The strength of the overall national economy, and especially in the Western U.S. is key to this improvement. The strengthening national and regionally economies have been the drivers of visitors and convention attendance to Las Vegas during the last few years, which is ultimately reflected in tourism spending. This said, a growing number of analysts are saying that there are signs of an economic slowdown. 2019 will be a telling year.
The Las Vegas MSA’s 12MMA nominal average weekly earnings (not inflation-adjusted) was up by about $4.20, reaching $807.78 in December 2018. This growth trend began more than 3½ years ago in September 2014. On a YOY basis, the nominal 12MMA was up $28 (3.6%) from December 2017.
When viewed on an inflation-adjusted basis (“real”), however, earnings rose only about $2.50 in December from the month prior, to $675.64 (in 2007 dollars). YOY real earnings rose by 1.1% ($7) compared to November 2017. Moribund real wage growth has received a lot of attention for some time by economists. It is partially a function of a skills gap, the growth of the “gig economy” and ongoing automation trends.
Las Vegas’ average weekly real wage is $75 (9.9%) below the most recent inflation-adjusted peak of $751 that occurred close to 11 years ago in August 2007. The trough occurred in February 2012 at just over $616, so Las Vegas remains closer to the trough than the peak.
The number of average weekly hours worked in Las Vegas (Clark County) on a 12MMA remained at 33.9 in December 2018, the same level recorded for the last two months. Weekly hours had been plodding upward since June 2016, but have flattened in recent months just below the state average. On a YOY basis, average weekly hours are the same as they were in December 2017.
In Q4, 2018, the Nevada U-6 unemployment rate (including discouraged and part-time workers) recorded a 0.1-point drop to 9.3%. While this should suggest that business reliance on part-time workers continues to decrease, the figure is still among the highest in the nation and suggests that a substantial number of new jobs being created are for part-time work, or that positions have been shifted into independent contracting roles. These factors may explain the recent plateau for weekly hours worked even as we reach “full employment.”
The price of gas in Las Vegas rose slightly over the last month. As of February 4th, 2019, the price of regular unleaded gasoline in the Las Vegas MSA was $2.90, which is $0.03 (1.2%) higher than a month ago. Compared to a year ago, the price of unleaded is up $0.18 or 6.5%.
Gas prices in LA-Long Beach are included in the chart because visitors from the region are a major driver of Las Vegas’ lodging and hospitality industry, specifically, and economy, generally. High gas prices could have a deleterious effect on tourist spending in Las Vegas.
According to AAA, “For most states, gas prices are starting off the first week in February cheaper than the last week in January. On the week, only eight states saw gas prices increase which is a big shift from the week prior that saw increases for 25 states. With the majority of state gas price averages decreasing, the national gas price average held flat at $2.26 even though the Energy Information Administration’s (EIA) latest demand rate reflected summer-like numbers.
For the week ending Jan 25, the EIA reported U.S. gasoline demand at 9.6 million b/d. The last time the rate was this high was during the 2018 Labor Day weekend. As the EIA rate is an estimate, it’s considered preliminary and the agency may revise it later this year when it releases final figures for the month. If the estimate is not revised, one reason for the jump could be the extreme cold weather seen last week.
“Three-fourths of the country faced below freezing temperatures last week which may have prompted many motorists, especially in the mid-west, to fill-up early and often ahead of the storm, in turn driving demand. This is similar to what we see prior to hurricanes,” said Jeanette Casselano, AAA spokesperson. “Now that the storm has passed, demand is likely to fall more in-line with typical February estimates.”
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