Wednesday, March 14, 2012

A Closer Look at January's Vegas Jobs Report

When I compiled the draft numbers for our first quarter reports last week, I was a bit stunned. I had been expecting a weak quarter, but not that weak. Now that I’ve seen the new employment numbers from the Nevada Department of Training, Education and Rehabilitation, I’m not so shocked.

I’ve seen some stories touting the drop in the unemployment rate, but a real delve into the numbers reveals a job market that started the year off by shrinking, with weak numbers across the board, not just in retail where one might expect a drop after the temporary hires for the holiday season.

For Las Vegas, the traditional important numbers have been Leisure & Hospitality - the engine of growth - Construction and Retail. Those are the meat and potatoes.

Leisure & Hospitality (L&H) saw a big boost in employment towards the end of last year which boded well for some more substantial recovery in mid- to late 2012, as those new jobs increased hiring in the wider retail sector, which creates jobs in other sectors, etc. Along come the January 2012 numbers and we see L&H taking a slight breather and giving back a few jobs. Until we see some February numbers float by, we can't call this a trend, but a continuation of the boost would have been more welcome.

Construction is an old story by now, fit for a VH1 Behind the Music episode. A meteoric rise as cheap money drove people into new homes and then an equally meteoric fall in 2008. The last few months, however, have seen the fall become less meteoric, and there were even a couple months in there where month-over-month construction employment increased. And then, once again, we see January numbers and we're back to the bad old days. Again, we can't call this a trend, but it's a painful development when one's optimism was just beginning to return.

The employment sectors that are most important to commercial real estate were universally bad when looking at quarter-over-quarter numbers (okay, except for Wholesale) ...

But not entirely bad when looking at year-over-year numbers, with Retail showing some strength, along with Transportation & Warehousing (linked with retail sales), Wholesale (linked with retail sales) and Manufacturing. The office sector is getting killed, though, and a cessation of growth in the Healthcare sector is a little distressing.

Still, when you look at the employment index (Jan 2006 = 100), you really don't see a recovery you can write home about.

As I’ve said many times, jobs and net absorption are tied pretty close, as this graph illustrates.

All in all, not the best way to start a year that already has some significant headwinds to throw against our sails. Let's see what February's numbers teach us.

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