This month’s Northern Nevada numbers show minor upticks or dips in a healthy regional economy.
The latest stats show that 7.3 percent of the Reno-Spark’s MSA’s payroll job base is in the construction industry; the August 2006 peak (on a 12MMA basis) was 11.1 percent of all jobs.
Also of note: Washoe County’s economy continues to benefit from rising taxable retail sales, but the year-over-year (YOY) growth rate has dropped from a year ago. In March 2018, growth was 5.7 percent YOY, 3 points lower than the year period ending in March 2017. The raw numbers are strong, though. Taxable retail sales in the region reached $698.8 million in March, having already surpassed the previous peak (March 2016) on a nominal basis (not inflation-adjusted). Washoe’s taxable sales growth is 1.4 points higher than the overall Nevada average.
In May 2018 the RCG Employment Index’s 12-month moving average (“12MMA”) for Reno-Sparks ticked up to 99.4. While the Index has been increasing at a slower rate, it continues making progress closer to the all-time high. The Index is up 0.7 points since May 2017. It peaked more than 12 years ago in December 2005 at 99.8 aka 100.0. The trough of 89.6 occurred in January 2010.
In May Reno-Sparks job growth, on a 12MMA, dropped 0.2 points from 5.0% to 4.8%. The rate of growth is up 0.2 points up from the 4.6% recorded in May 2017. The lowest rate of growth in the last 10 years happened in December 2009 (-9.3%).The region’s previous record 12MMA high was in August 2016 when jobs grew by 4.9%.
The 12MMA headline unemployment rate held at 4.0% in May. When compared to the May 2017 headline rate of 4.7%, this May’s rate was 0.7 percentage-points lower. In comparison, strong job numbers for the Las Vegas MSA resulted in a 0.1 point decline in the unemployment rate there after 4 consecutive months at 5.2%. Reno has reached rates seen before the Great Recession.
There were 86,083 construction jobs in Nevada in May 2018. 16,925 (19.7%) of those jobs were in the Reno-Sparks MSA (12MMA). While this is a notable jump of 8.4% from the 15,608 jobs reported in May 2017, over February and March of this year, construction jobs were unchanged, and compared to April, construction jobs actually fell slightly by 17. Reno’s very healthy economy has produced strong residential and commercial real estate demand, but also to shortages of housing units and certain types of commercial space, especially industrial.
The latest stats show that 7.3% of the region’s payroll job-base is in construction. Construction jobs in the Reno-Sparks MSA peaked at 24,042 in August 2006 on a 12MMA basis. Current construction jobs are at 70.4% of the peak. At the time of the peak the industry accounted for 11.1% of all jobs. The large number of jobs in the construction sector was a consequence of the pre Great Recession real estate bubble. The sector bottomed out in February 2012 when there were only 8,792 construction jobs.
The annualized visitor count for Washoe County fell -0.27% from March 2018’s 5.15 million to 5.14 million in April 2018. However, with a YOY visitation growth rate of 3.9%, Washoe County continues to outpace growth in Clark County, which had a visitation growth rate in April of -1.9%. We believe visitation to Clark County is being negatively affected by a shortage of rooms.
Early in 2016, Washoe had been lagging behind Clark in visitor growth, but the tables have turned with YOY visitor growth rates in Washoe beating those of Clark every month since June 2016 because of the supply constrained note above.
Washoe County has now seen YOY growth in visitor volume every month for more than 3 straight years (since January 2015) at an average rate of 3%. The 12MMA peak occurred in May 2004, when 467,904 visitors came to Washoe. The highest annual growth rate happened in January 2013, when visitor volume grew 5.8%. Despite earlier challenges, the Reno-Sparks hospitality industry has made important gains and continues to grow stronger.
Washoe County’s 12MMA YOY gross gaming revenue grew by 4.6% in April 2018. This brings total revenue up to $70.1 million, or 78% of the peak (see below). In comparison, Clark County had a YOY growth rate of 2.6% this April. Both counties saw an increase in the gross gaming revenue growth rate. The YOY growth rate for Washoe County has been positive for more than 3 years straight at an average of 3%.
Gaming revenues peaked more than 11 years ago in June 2006 at $89.4 million. On an annual growth rate basis, the peak of 5.5% happened in May and June of 2006.
While Washoe County’s economy continues to benefit from rising taxable retail sales, the YOY growth rate has dropped from a year ago. In March 2018, growth was 5.7% YOY, or 3 points lower than the year period ending in March 2017. When compared to February 2018, it is down 0.2 points. Taxable retail sales reached $698.8 million in March, having already surpassed the previous peak (March 2016) on a nominal basis (not inflation-adjusted). As the chart shows, Washoe’s taxable sales growth is 1.4 points higher than the overall Nevada average.
Success in business attraction and retention, and proximity to the Bay Area and the Pacific Northwest, is driving the region’s economy. It is the primary cause of growth in taxable retail sales, though increasing visitation has also contributed.
This month we continue the introduction of a new chart for Stat Pack. It displays Washoe County taxable sales generated in a selected sample of what we are calling the “better known” (“BK”) activities. We hope this will give readers an insight into the level of economic activity in familiar industries. Some of these sectors are not necessarily large generators of sales taxes, but we think readers will find them interesting.
In March 2018, Retail made up 62.5% of taxable sales of the BK industries and 60.1% of total sales in all sectors. Compared to March 2017, Retail is down 1.9 points as a share of BK sectors. Accommodation & Food/Beverage was the second largest (15.3% of BK sectors and 14.7% of total sales). Accommodation & Food/Beverage is down 0.6 points from March 2017’s 15.9% of the BK industries. Manufacturing came in at a distant 3rd place with 5.5% of the BK set, beating out last month’s 3rd place finisher, Telecom & Media.
In April 2018 MLS home resales in Washoe County fell by 2 percentage points from the previous month to 571 on a 12MMA. When compared to April 2017, resales rose by 6.6%. The resale YOY growth rate rose 0.5 points in April compared to March and has picking up steam since December 2017. For over 3 straight years, home sales have been increasing on a YOY basis, with an average rate of growth of 4.2%.
The median sales price rose to $354,540 (12MMA) in April, a 13.3% jump from April 2017. By comparison, the Las Vegas median resale price in April also jumped by 13.3%; However, the Las Vegas price is much lower at $237,117. The looming housing affordability issue in both regions also applies to the new home market.
In Q1, 2018 the Housing Opportunity Index (“HOI”) for the Reno-Sparks MSA dropped 0.6 points from 43.3 in Q4 to 42.7 in Q1 on a four-quarter moving average (“4QMA”) basis. The U.S. index increased by 0.3, from 59.4 to 59.7, during the same period. The Reno-Sparks 4QMA HOI is 17 points lower than the national number. On a YOY basis, the Reno-Sparks index fell -7.4 points from 50.1 in Q1, 2017.
Reno-Sparks’ HOI peaked at 85.8 in Q1, 2012 and has been trending downward ever since. It bottomed out at 17.3 in Q4, 2006 at the peak of the housing boom. The 10-year average is 65.1. The region’s latest index is now 22.4 points below the 10-year average. There could be issues regarding housing affordability in Reno-Sparks in the future if the index continues to deteriorate. If this this trend continues, housing affordability is likely to become a major issue in the region, stymieing economic growth.
The HOI is based on the share of homes sold that are affordable to a family earning the median income in the Reno-Sparks MSA, assuming standard mortgage underwriting criteria.
According to Colliers International, Reno-Sparks Office vacancy continues on a downward trajectory in Q1, 2018. Office vacancy fell 0.2 points from the previous quarter to 12.1% on a 4QMA basis, its lowest value in more than 13 years, since Q4, 2004. The Reno-Sparks Spec Office market has seen slow and steady improvement since Q3 2010 when the Spec Office market had reached peak vacancy of 21.6%.
The Industrial vacancy rate also fell in Q1, dropping 0.8 percentage-points and reaching 6.3%. After 5 consecutive quarters of increasing vacancy, the Industrial markets vacancy rate has now fallen 7 straight quarters. Vacancy is now comfortably below the 10% stabilized rate. Although a large amount of new product has recently come to market, the Reno-Sparks MSA has had a healthy appetite for Industrial space.
The 12MMA of the nominal average weekly wage (not adjusted for inflation) in the Reno-Sparks MSA grew $5 in May 2018 to $809, the biggest monthly gain since January 2016. May was the 11th consecutive month of growth. When considered on a YOY basis the unadjusted weekly wage is up 2.2% from $791 in May 2017.
The inflation-adjusted (real) 12MMA wage for May 2018 of $686 is up $3 from the previous month’s wage, but despite the gain, May’s wage is just even with the wage recorded in May 2017. Reno-Sparks workers did not see any wage growth over the year, a long-running problem for workers across the US. This has received attention since the recovery started. It is partially a function of the growth of the “gig economy” plus ongoing automation trends. Reno-Sparks’ real wage has fluctuated between $682 and $686 for more than a year and has been unable to maintain an upward trend. In May, the region’s average weekly earnings were 2.5% higher than the Las Vegas average of $669. The real wage peak of the last 10 years occurred in May 2016 when it was $730.
In May 2018, the Reno-Sparks MSA’s average weekly hours gained back the 0.1 hours that it had lost in April, resulting in average weekly hours of 35.4. Weekly hours had been trending down and this was the first month that they increased since June 2017. Conversely, weekly hours in Las Vegas have been trending slowly upward, but in May saw a 0.1 hour decrease. On a YOY basis, weekly hours for Reno-Sparks are down -0.3 from May 2017. The most recent weekly hour’s peak happened in July 2009 at 36.8 hours, while the trough of 32.5 hours happened over 3 years ago in September 2014.
The average price per gallon for regular unleaded gasoline in Reno-Sparks as of June 8, 2018 was $3.47, up $0.09 (2.5%) from $3.38 the previous month. When compared to the previous year the price of regular unleaded is up $0.44 (14.5%). Gas prices have been rising steadily and could impact resident and business spending in other areas of the local economy, although it appears that they topped off at the end of May and are now stabilizing.
According to AAA, “Nationally consumers are spending $69 more a month to fill-up compared to last summer. Gasoline expenses are accounting, on average, for seven percent of an American’s 2018 annual income, a one and half percent increase since summer of 2017. With strong summer consumer gasoline demand expected in the months ahead, AAA says motorists can expect little relief at the pump with the national gas price average ranging between $2.85 – $3.05 through Labor Day.
Pump prices in the West Coast region are among the highest in the country, all topping out above $3.00 per gallon: California ($3.72); Hawaii ($3.71); Washington ($3.46); Alaska ($3.43); Oregon (3.34); Nevada ($3.33); and Arizona ($3.07). On the week, prices continue to mostly decline in the region by a penny or two. However, Arizona (+1 cent) and Alaska (+2 cents) saw increases, while Oregon (-2 cents) saw the largest decrease in the region.
According to EIA data for the week ending on June 1, inventories of gasoline fell by 200,000 bbl to reach 31.1 million bbl. When compared to a year ago, levels are still up more than 3 million bbl and could contribute to price stabilization in coming weeks.”
Per the World Gold Council, in May, the month-end spot price of gold (ounce of pure gold) increased by a little under $3 (0.22%) to just under $1,296 on a 12MMA basis. On a monthly basis, gold prices have increased for 7 months straight. On a YOY basis, the price of gold is up 2.7%. Though the YOY growth rate been trending up for 5 months straight, in May it saw a slight 0.2-point decline from 2.9% the month before. Still, prices have been increasing on a YOY basis for the past 22 months.
Nevada excise tax revenues generated from marijuana sales through the first 9 months are nearly $49 million, with the most recent recorded month, March 2018, seeing a considerable spike in revenue of more than $1.1 million from the previous month. March brought in about $7.1 million in combined retail and wholesale taxes, compared to $5.9 million in February. The most readily available 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 only recreational users purchasing marijuana at a dispensary.
According to the Department, tax revenue from the sale of marijuana is expected to reach $120 million during the next 2 years. Collections during that last 9 months indicate that the Department’s forecast is right on track. Another boost for Nevada’s marijuana industry may come if President Trump follows through with his recent suggestion that he is open to legalizing the drug at the federal level.