The U-3 unemployment rate, or “headline rate”, after ticking up 0.1 points in Q1 2018, dipped by 0.2 points in Q2. The rate is now 0.3 points above the average rate for 2007 (4.6 percent), the year the Great Recession hit. The U-6 rate, which measures under-employment, saw a 0.7-point decline from 10.4 percent to 9.7 percent, which is still the 5th highest in the country. Employer reliance on part-time workers explains the rate, in part.
For all the latest metrics, scroll down. As always, feel free to send questions to RCG Economics Principal John Restrepo at email@example.com.
In June 2018 the RCG Employment Index’s 12-month moving average (“12MMA”) remained at 98.7, taking a step it had not made for 4 straight months and impelled by May’s impressive Las Vegas MSA job numbers. On a YOY basis the Index is up 0.4 points from April 2017. The Index is now just 1.3 points below the November 2006 peak of 100.
The 12MMA of Clark County’s headline unemployment rate was 5% in June, another drop of 0.1 points following May. The 12MMA is 0.5 points below last June’s 5.5%. This metric reached its lowest level more than 11 years ago in October 2006 at just 4%. Southern Nevada is now theoretically at “full employment.” Strong federal job numbers had foreshadowed June’s continued decline in unemployment for the Las Vegas MSA.
In June the 12MMA rate of job growth in the Las Vegas MSA held at 2.6% for the 4th consecutive month. YOY job growth is up by 0.1 points from May to an even 3%. The 12MMA job growth rate has been on a downward trajectory since September 2015. Analysis by the Brookings Institution posits job growth at the regional and national levels has been suffering from the same effect: the slowdown is mainly due to decreasing demand for unskilled labor. At the same time, the economy continues to strengthen, performing better than some analysts had predicted. While President Trump’s economic policy of deregulation and tax cuts, and his willingness to add to the deficit, may be sustaining the strength of national job growth in the short-term, there are consequences looming down the road. Also, it will take some time to see the full impact of the Administration’s implemented and threatened tariffs.
The U-3 unemployment rate, or headline rate, for Nevada, after ticking up 0.1 points in Q1 2018, moved back down by 0.2 points in Q2. The U-3 rate is now 0.3 points above 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, had a 0.7-point decline from 10.4% to 9.7%.
In terms of the U-3 rate, Nevada fell one spot to have the 6th highest headline rate in the nation. While the U-6 rate saw strong improvement, Nevada still holds the 5th highest rate in the country, falling from 3rd-highest in the previous quarter. Nevada businesses maintain a significant reliance on part-time workers.
Construction in the Las Vegas MSA continues to be boosted by a strong housing market and improving commercial markets. In June 2018, the number of Southern Nevada construction workers rose by 5,042 (12MMA) from June 2017, an 8.8% increase. This was a slight improvement over the previous month’s YOY increase of 8.7%. June’s gains put total construction jobs at 62,058. That marks 72 straight months (or 6 years) of construction job growth. President Trump’s decision to put tariffs on metals from the E.U., Canada and Mexico, along with industrial equipment from China, are likely to have an impact on the Las Vegas construction industry.
In June 2018, construction jobs represented 6.5% of the region’s job-base, an increase of 0.3 points from the previous month and recovery of most of the May’s decline. During the real estate bubble of 2000-2007, construction jobs accounted for as much as an extraordinary 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 June 2018 was 42 million. The number of visitors to Clark County declined again after just 2 months of gains. The decrease in June from the previous month was 0.7%. On a YOY basis, this was the 11th consecutive month of annualized visitation decline, down 1.7% when compared to June 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, 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. Year-to-date visitor volume in June 2018 is 21.0 million. That is lower than the same points in 2016 (21.3 million) and 2017 (21.2 million), and if trends continue it will be difficult for 2018 to match either of the previous two years.
In June, Clark County’s annualized convention attendance saw a 0.22% increase from the previous month, at 6.55 million. While there has been more monthly volatility in 2018, annualized convention attendance is still up 3.7% compared to June 2017. The annualized peak of 6.65 million convention attendees occurred in December 2017.
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%. During the first 6 months of 2018, attendance grew by an average of 4.7% 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 June 2018, the 12MMA of hotel revenue per available room (RevPAR) in Clark County was $113.35, a loss of $0.58 (0.51%) from the previous month. When compared to June 2017, RevPAR is down even more, falling $1.45 (-1.3%). This is the 4th straight YOY decline in RevPAR after more than 7 consecutive years of growth. The RevPAR 12MMA peak of $119.43 occurred in December 2007. This 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, net baccarat revenue was up 0.22% in June from the last month, for a total of $742.9 million. The streak of positive YOY growth was continues, reaching 41 consecutive months with an increase of 2.8% from June 2017. Net baccarat revenues are at 89% 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 under 35 have caused a decrease in slot revenues, they are now recovering as US household disposable income has increased.
Of the 5,011 total Las Vegas MSA home sales in June, 4,168 were resales, while 843 were new home sales. According to Home Builders Research, in June, total (new and resales) Clark County home closings, on a 12MMA basis, were down -0.38% from the previous month. On a YOY basis, total home sales were 5.4% higher than in June 2017.
The 12MMA for new home sales saw a YOY growth rate of 15.7% in May. Existing home sales saw slower growth in June at 3.6%.
Per Home Builders Research, June’s 12MMA median home price (new and resale) was $262,245, a 1.1% gain over the previous month. Compared to June 2017, the price is up 14%, the highest YOY growth in weighted home price since September 2014. The YOY growth rate has now been rising steadily for 13 months, but is well below the YOY peak of 35.8% growth in February 2005. The current median home price remains well below the February 2007 peak of $305,333. June’s figure is about 86% of the peak price.
The median new home price was up 8.8% from June 2017, marking 15 consecutive months of setting new records with a new peak of $359,377. The previous cycle peak of $327,066 occurred in February 2007.
The median resale home price was $242,458 in June, a 14.5% 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 84.5% of its pre-recession peak price.
The rate of home appreciation for new and resale homes, combined, continued its rising trend in May. 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. Through the first 6 months of 2018, the YOY growth rate has averaged is 12.7%.
The 12MMA 30-year fixed-rate mortgage in the Western Region continues to climb. An increase of 0.04 points in July puts the rate at 4.2% (12MMA). This was the 6th 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 crossed 170 in May 2018, a rise of 10.1% compared to May 2017. The Las Vegas index has risen for 69 straight months, while the YOY growth rate has grown steadily since March 2017. The US index in May was up another 1.1 points to 205.3, an increase of 6% compared to the previous year. Both indexes have been on the rise since 2012.
The Las Vegas index peaked at 233.2 in December 2006, with the latest figure at index is 73% 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.
On a 4-quarter moving average basis, the Housing Opportunity Index (“HOI”) for the Las Vegas MSA fell for the 6th straight quarter, this time by a whopping 4.1 points to 56.4 in Q2 of 2018. Over 6 quarters the Las Vegas HOI has dropped by a total of 11.3 points. The Las Vegas HOI peaked at 86.2 in Q1 2012 and bottomed out at 15.4 in Q1 2007 at the height of the housing boom; the average is 71.8 for the last 10 years. Affordable housing is currently on the decline in the Las Vegas MSA.
The U.S. index experienced a decline as well, falling from 59.7 in Q1 2018 to 59.2 in Q2. Housing prices nationally are rising slightly but trending stable.
The HOI is based on the share of homes sold that are affordable to a family earning the median income in the selected jurisdiction, assuming standard mortgage underwriting criteria.
The Las Vegas Valley’s 12MMA apartment vacancy rate fell slightly up to 7.5% in Q2 2018. The general trend since 2011 has been down, though apartment vacancy has fluctuated between 7.5% and 7.7% since Q4 2016. The recovery in apartment vacancy has been slow, peaking at 10.8% in Q2, 2010 just three years from a low of 5.1% in Q1, 2007.
The 10-year U.S. Treasury moved moderately higher during July, finishing the month up 12 basis points from June at 2.98%. The 30-Day LIBOR did not track with the Treasury, decreasing slightly by 3 basis points to 2.07%. The Federal Reserve upgraded its assessment of the U.S. economy, but left interest rates unchanged for now. The committee is widely expected to approve two additional rate increases this year. There were many potential market moving events in July, including ongoing threats from the President to impose $505 billion in tariffs on Chinese imports and Facebook posting the largest one-day market value decrease by any company in U.S. stock market history. Despite these events, the S&P 500 closed out July with solid gains.
As interest rates creep up to and past 3%, investors are feeling pressured to secure long-term, fixed rate loans on their commercial properties.
Taxable retail sales continue to rise in Clark County, with 0.46% growth to $3.52 billion from April to May. On a YOY basis, growth in the 12MMA remained at 3.6% in May. We believe much of the dollar growth in taxable sales is due to healthy visitor spending numbers and strong construction activity.
The consistent growth of taxable sales has given the local and state government more money to work with. The strength of the national economy and its local and regional markets are key to this improvement. These larger economies are the primary drivers of visitors and convention attendance to Las Vegas, which is ultimately reflected in tourism spending in the region. We appear to have settled into a longer-term rate trend of around 3-4% sales growth per year.
The number of average weekly hours worked in Las Vegas (Clark County) on a 12MMA remained at 33.9 in June 2018, the same level recorded in May. Weekly hours had been plodding upward since June 2016, but fell last month. On a YOY basis, average weekly hours are up 0.4 hours from June 2017.
In Q2, 2018, the U-6 unemployment rate (including discouraged and part-time workers) recorded a 0.7-point drop. 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 had been rising steadily for months but now appears to be on the decline. As of August 13, the price of regular unleaded gasoline in the Las Vegas MSA was $3.13, which is $0.6 (-2.9%) lower than a month ago. Still, when compared to a year ago, the price of unleaded is up $0.56.
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, “The Energy Information Administration’s (EIA) latest reports detail a drop in consumer gasoline demand and a build in gasoline inventories. In fact, this was the first increase in inventories in six-weeks with a substantial addition of 3 million bbl. With a flat national average, U.S. gasoline supply and demand suggest they are balancing. But that’s not to say that we could not see spikes in demand closer to Labor Day as motorists squeeze in those final road trips.
Pump prices in states in the West Coast region are among the highest in the country: Hawaii ($3.76), California ($3.61), Washington ($3.39), Alaska ($3.36), Oregon ($3.27), Nevada ($3.19) and Arizona ($2.89). When compared to last week, all pump prices in the region are down. Arizona (-2 cents) saw the largest drop.
According to EIA’s petroleum status report for the week ending on August 3, inventories of gasoline in the region grew by 200,000 bbl. They now sit at 30.4 million bbl, which is nearly four million bbl higher than total levels at this time last year. Growing supplies will provide a cushion for price fluctuations, which could help pump prices stabilize if there are any shocks to regional supply this week.”
Electric meter hookups’ 12MMA in June 2018 reached 817,359. Total hookups were up 1.8% from June 2017. Over the last 33 months, the annual growth rate for electric meter hookups has hovered between 1.7% and 1.9%. This hints at stable growth in business and household formation, as well as overall population, in the Las Vegas Valley. The peak YOY 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 12MMA for Clark County’s E-P Ratio remained flat at 1.3 in June May. Relative to June 2017, the E-P Ratio is down 0.3 points from 1.6.
The general consensus among real estate analysts 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 for nearly 2 years, since October 2016.
Nevada excise tax revenues generated from marijuana sales through the first 11 months are $62.6 million, with the most recent recorded month, May 2018, seeing a 8.6% increase in revenue from the previous month. May brought in about $7.1 million in combined retail and wholesale taxes, compared to $6.5 million in March. 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 points of sale in 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 only to recreational users purchasing marijuana at a dispensary.
According to the Department, tax revenue from the sale of marijuana is expected to reach $120 million in the first 2 years. Collections over the first 11 months indicate that the performance may slightly exceed the Department’s forecast.