Below are the latest updates to our tracked Southern Nevada economic metrics. As always, feel free to share our graphs far and wide, and reach out to John Restrepo at firstname.lastname@example.org with questions.
In May 2018 the RCG Employment Index’s 12-month moving average (“12MMA”) ticked up 0.1 points to 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 0.5 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 5.1% in May, a drop of 0.1 points after 4 months straight of a stagnant unemployment rate. The unemployment rate is 0.5 points below last May’s 5.6%. It reached its lowest level over 11 years ago in October 2006 when it was just 4%. Southern Nevada is now theoretically at “full employment.” Strong federal job numbers had foreshadowed May’s decline in unemployment for the Las Vegas MSA.
In May the 12MMA rate of job growth in the Las Vegas MSA held at 2.6% for the 3rd consecutive month. The 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. However, 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 threatened tariffs.
Construction in the Las Vegas MSA continues to be boosted by a strong housing market and improving commercial markets. In May 2018 the number of Southern Nevada construction workers rose by 4,917 (12MMA) from May 2017, an 8.7% increase. This was smaller than the previous month’s YOY increase of 9.3%. May’s gains put total construction jobs at 61,508. That makes 71 straight months (nearly 6 years) of construction job growth. Donald Trump’s decision to put tariffs on metals from the E.U., Canada and Mexico and industrial equipment from China, are likely to have an impact on Las Vegas’ construction industry.
In May 2018, construction jobs represented 6.2% of the region’s job-base, a drop of 0.4 points from the previous month and suggesting a construction worker shortage considering how much development is occurring in the region. During the real estate bubble of 2000-2007, construction jobs accounted for as much as an extraordinary 11.4% of all MSA jobs when construction jobs peaked at 108,833 in November 2006.
The Las Vegas MSA’s 12-month visitor count (annualized) in May 2018 was 42.1 million. The number of visitors to Clark County rose in May for the second consecutive month after 10 months of decline. The increase in May from the previous month was 0.8%. On a YOY basis, this was the 10th month in a row visitation has declined. Visitation in May was down -1.8% when compared to May 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 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. So far through May, the visitor total is 17.5 million. That is lower than the same periods in 2016 (17.7 million) and 2017 (17.6 million), though if visitation continues to improve, we may see 2018 approach, or even surpass, the totals for each of the previous two years.
In May, Clark County’s annualized convention attendance saw a -0.39% decrease from the previous month, putting the annualized total at 6.5 million. May marks the 3rd annualized convention attendance decline in 5 months. However, when compared to May of 2017, convention attendance is still up 3.8%. 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 drastically to 3.9%. During the first 5 months of 2018 attendance grew by an average 4.9% 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 May 2018, the 12MMA of hotel revenue per available room (RevPAR) in Clark County was $113.94, a gain of $0.53 (0.46%) from the previous month. However, when compared to May 2017, RevPAR is down $0.93 (-0.8%). This is the 3rd 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 gaming revenue net of baccarat was up 0.26% to $741.3 million in May. The streak of positive YOY growth was extended to 40 straight months with an increase of 2.7% from May 2017. May’s gaming revenues net of baccarat were nearly 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 because US household disposable income is finally rising in real terms.
Of the 5,030 total home sales in May, 4,197 were resales, while 834 were new home sales. According to Home Builders Research, in May, total (new and resales) Clark County home closings, on a 12MMA basis, were down -0.27% from the previous month.
On a YOY basis, May total home sales were 6.8% higher than May 2017. New home sales saw a YOY growth rate of 15% in May. Existing home sales are growing steadily with a YOY growth rate in May of 5.4%.
Per Home Builders Research, May’s 12MMA median home price (new and resale) was $259,369, a 1.2% gain over the previous month. Compared to May 2017, the price is up 13.7%, the highest YOY growth in weighted home price since October 2014. The YOY growth rate has been rising steadily for a full year. The current median home price remains well below the peak of $305,333, which was recorded over 11 years ago in February 2007. May’s estimate is now 85% of the peak price.
The median new home price was up 8.1% from the previous year, reaching a new peak in May of $356,040. The previous peak of $327,066 occurred in February 2007.
The median resale home price was $239,950 in May, a 14.5% jump during the last 12 months. The peak of $286,833 occurred more than 11 years ago in April 2007. The resale average has now recovered almost 84% 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 5 months of 2018 the YOY growth rate average is 12.4%. The annual peak of 35.8% growth occurred in February 2005.
The 12MMA 30-year fixed-rate mortgage in the Western Region continues to climb. An increase of 0.06 points in June puts the rate at 4.16% (12MMA). This was the 5th increase in a row after 2 straight dips. The 12-year peak of 6.4% happened in October 2006. While the 30-year fixed rate mortgage should remain relatively low, it will likely go up because of Federal Reserve actions.
The 12MMA Case-Shiller home price index for the Las Vegas MSA reached 169 in April 2018, a rise of 9.9% compared to April 2017. The Las Vegas index has risen for 68 straight months while its YOY growth rate has been growing steadily since March 2017. The US index in April was up 1.1 points, an increase of 6.2% compared to the previous year that puts the national index at 204.1. Both indexes have been on the rise since 2012.
The Las Vegas index peaked at 233.2 in December 2006. The latest LV index is 72% 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.
As we end the first half of 2018, the 10-year U.S. Treasury climbed from 2.45% at the beginning of the year to 2.86% and the 30-day LIBOR moved from 1.56% to 2.10%. The Federal Reserve hiked its benchmark rate for the second time this year and have updated their 2018 forecast to four total increases. There were many potential market-moving events in June, including the continued trade war rhetoric from the President, the North Korean summit, and the renewed fear that Italy may exit the Eurozone. There was a short-lived flight to quality that briefly pushed the 10-year U.S. Treasury yield below the 3% threshold until it bottomed at approximately 2.80%.
Finally, the initial full year forecast for $75 billion of US CMBS issuance is on track with bond investors still favoring shorter duration.
Taxable retail sales continues to rise in Clark County with 0.65% growth in April compared to the previous month. On a YOY basis, growth was 3.6% from April 2017. We believe much of the dollar growth in taxable sales is due to healthy visitor spending numbers and strong construction activity. Another record high was reached in March with over $3.51 billion in sales on a 12MMA.
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. Growing regional and national economies have driven Southern Nevada’s growth, benefiting all of its sectors. 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 may now be witnessing the long-term trend rate for sales of around 3-4% per year.
The above chart displays Clark County taxable sales generated in a selected sample of what we are calling the “better known” (“BK”) activities. We hope this gives our readers an insight into the level of economic activity in familiar industries/sectors. Some of these sectors are not necessarily large generators of sales taxes, but we think our readers will find them interesting.
In April 2018, Retail made up 56.2% of taxable sales of the BK sectors and 53% of total sales. Compared to April 2017, Retail was up 0.02 percentage-points as a share of BK sectors. Accommodation & Food/Beverage, an important sector for Clark County, was the second largest (28.8% of BK sectors and 27.2% of total sales) in April. The Accommodation & Food/Beverage industry is down 0.5 points from April 2017’s 29.3% share of the BK group. Manufacturing came in at a distant 3rd place with 4.8% of the BK set, with Real Estate not far behind at 3.9%.
The Las Vegas MSA’s 12MMA average weekly earnings (not inflation-adjusted) was up by $2, reaching $792 in June 2018. This growth trend began more than 3 ½ years ago in September 2014. On a YOY basis, the 12MMA was up $29 (3.9%) from June 2017.
When viewed on an inflation-adjusted basis, earnings grew slightly in June from the month prior, increasing by $1 to $671 (in 2007 dollars). YOY real earnings rose by 1.6% ($11) in June compared to June 2017. Moribund wage growth has received a lot of attention for some time by economists. It is partially a function of the growth of the “gig economy” plus ongoing automation trends.
Las Vegas’ average weekly real wage is now $80 (11%) 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 dropped to 33.9 in May 2018, erasing the 0.1 point gain made the previous month. This is the first decline since March 2016. Weekly hours had been plodding upward since June 2016. On a YOY basis, average weekly hours are up 0.4 hours from May 2017.
In Q1, 2018, the U-6 unemployment rate (including discouraged and part-time workers) recorded a 0.4-point drop. While this should suggest that business reliance on part-time workers continues to decrease, it very well might be that many of the new jobs being created are for part-time work.
Implication: Despite a 0.4 point-decrease in the U-6 unemployment rate in Q1, many companies continue to depend heavily on part-time workers and independent contractors. Despite what feels like a thriving economy and better than expected job numbers, employers may still feel reluctant to bring new employees in full-time, instead easing them into the company on a part-time basis. There is also the growth of the “gig economy” and widening automation. As a partial consequence, Nevada’s U-6 rate remains the nation’s 3rd highest at 10.4% as of Q1, 2018.
The price of gas in Las Vegas had been rising steadily for months but now appears to be on the decline. As of July 12, the price of regular unleaded gasoline in the Las Vegas MSA was $3.19, which is $0.12 (-3.6%) lower than a month ago. Still, when compared to a year ago, the price of unleaded is up $0.61.
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. Rising gas prices could have a deleterious effect on tourist spending in Las Vegas this summer.
According to AAA, “Total crude oil stocks fell an astonishing 12.7 million bbl last week. The Energy Information Administration (EIA) has not recorded a decline of that size since October 2016. EIA data measures stocks at 405.2 million bbl, which are roughly 90 million bbl lower than they were at this time last year. This puts a continued spotlight on tightening U.S. supplies, which are likely to continue dropping as domestic demand for gasoline holds strong while crude and gasoline exports from the U.S. remain robust. If these trends continue amid high global crude demand, oil prices may continue riding high and contribute to increased pump prices throughout the summer and possibly into the fall.
Pump prices in the West Coast region are among the most expensive in the country: Hawaii ($3.73), California ($3.66), Washington ($3.44), Alaska ($3.40), Oregon (3.32), Nevada ($3.24) and Arizona ($3.00). Most prices in the region have declined on the week, with Arizona (-2 cents) leading the group.
Inventories of gasoline in the region fell for a third consecutive week, according to the Energy Information Administration’s (EIA) petroleum status report for the week ending on June 29. Dropping by nearly 150,000 bbl, total inventories now sit at 30.5 million bbl. However, inventories are approximately 2.2 million bbl higher than they were at this point last summer, which will likely help prices stabilize if there are any major supply disruptions in the region this week.”
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. After last month’s 0.4 point gain, the E-P Ratio for Clark County fell back down 0.2 points in May. Relative to May 2017, the E-P Ratio is down 0.4 points from 1.7.
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 1 ½ years, since October 2016.
Nevada excise tax revenues generated from marijuana sales through the first 9 months are $55.5 million, with the most recent recorded month, April 2018, seeing a -7.69% decline in revenue from the previous month. April brought in about $6.6 million in combined retail and wholesale taxes, compared to $7.1 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 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 in the first 2 years. Collections over the first 10 months indicate that the Department’s forecast is right on track.