Friday, May 27, 2016
Son of Boom
The recovery index above tells the tale. It shows numerous measures of the local economy, comparing their year-over-year performance. These indices compare current performance to an arbitrary date in the past, in this case January 2005. You can read the current level as a percent of the level in 2005.
On the positive side, we see Gaming Revenue, Employment, Taxable Sales and LA Port Traffic are all better than they were a decade ago (though not by much). Commercial Occupancy and Visitor Volume are nearly there. The takeaway – Southern Nevada’s gaming business is doing well. People are back to work and locals and visitors are spending money.
Electric meter hook-ups tell a similar story of slower growth, and construction jobs, while they have in recent months shown improvement, remain well below boom levels.
This leads us to the two problems with the new economy. First and foremost, our eggs are truly all in one basket now – hospitality. We also can no longer rely on population growth to get us out of national (or global recessions). In the good old days, hundreds of new incomes coming to the valley every month created a buffer for Southern Nevada in times of recession – that buffer is effectively gone.
That means that when the next recession hits – likely within the next one to three years – Southern Nevada can expect to experience it in much the same way as the rest of the country (or planet). Keep this in mind as you advise clients in terms of expected return on investment properties, assuming they plan to hold them for fewer than four or five years, and on tenant renewals.