Monday, May 7, 2012
Don't Page the Fat Lady Just Yet
In January, the slide in our Recovery Index ended, and the index has sat at 89 for two months now. Flat, but marginally better than December and a clear improvement over Jan/Feb of 2011, 2010 and 2009. Unfortunately, the index is about 10 points lower than it was in Jan/Feb 2008 (when the recession essentially began).
The bright spots in February 2012 was the fact that almost all of the components of the Recovery Index were up year-over-year, with the big boosts being in New Residents (very important for the local economy), Gaming Revenue and Taxable Sales (is retail ready for some growth?) Only one measure was flat – Commercial Occupancy – which is linked to Employment, which was only up 1 point (or 2,200 jobs) year-over-year, and most of those jobs were in Leisure & Hospitality, not in industries related more directly to the occupancy of commercial space.
The good news is that the local economy is, in a slow, measured way, improving. The not-so-good news is that it could still be a while before we really see that improvement in commercial real estate. Jobs is the thing (I might have mentioned that about 3,000 times since 2007), and right now we’re waiting for jobs in the Resort corridor to translate into jobs in the suburbs. The best model I could construct suggests that we should already be seeing that suburban job creation – the lag should be about 6-9 months and hotel/gaming employment began rising about mid-2011. The fact that we’re not suggests that Southern Nevada, like the United States in general, is experiencing a drop in labor force participation related not only to the Great Recession, but to long-term demographic trends and a skill set mismatch between unemployed workers and available jobs.
Demographically speaking, we could be seeing an ebb in the tide of of “two-worker” households. Much of the decline in labor force participation is in the male demographic, so it could be that women are simply displacing men in the job market now, rather than supplementing them. More worrisome is the extension of “childhood” (i.e. living at home and playing video games) into the mid- to late 20’s. A similar phenomenon can be seen in Japan and Europe, and this lack of productivity in the young does present a major problem for nations that seek to redistribute wealth from the young to the old. It might also represent a rational decision by the young, who don’t see much benefit from participating in a society that redistributes money from young folks in the bottom quintile of earners to old folks in the upper quintiles of earners.