Tuesday, January 25, 2005

NEVADA ECONOMY: Unemployment creeps upward

Las Vegas area joblessness falls even as state rate advances slightly


Click image for enlargement.
Graphic by Mike Johnson.

Nevada continues to lead the nation in job growth thanks to the explosive Las Vegas area economy, even though the statewide unemployment rate edged up slightly in December, a report Monday from the state Department of Employment, Training and Rehabilitation shows.

Statewide, December's unemployment rate was up 0.1 percent to 3.8 from November's 3.7 percent. For the Las Vegas area, however, unemployment fell 0.1 from November to December when 3.5 percent of Southern Nevadans were jobless.

Overall employment in the Las Vegas area rose by 5.3 percent to 855,500 in December from the same month in the prior year. Statewide, total employment grew 4.8 percent to 1,115,000, the employment department said.

The jobs figures look even better when compared to a year ago, with the 3.5 percent Las Vegas area unemployment rate declining from 4.5 percent. Statewide, unemployment decreased to 3.8 percent from 4.7 percent in December of the prior year, the state department reported.

The state's December jobless rate compares to 5.4 percent unemployment nationally and 5.8 percent in California last month, said Robert Murdock, chief economist for the employment department.

"That puts Nevada in a very positive light for unemployment," Murdock said, noting that Nevada is leading the nation in job growth.

However, Dawn McLaren, research economist with the Bank One Economic Outlook Center at Arizona State University said the unemployment numbers are unreliable.

The number of workers who stop seeking jobs during slack periods makes unemployment look lower than it is, she said. Similarly, the number of workers starting to seek work again makes unemployment look higher than it is when job prospects pick up.

She and Murdock also expressed opposite views on prospects for Nevada's economy.

"We're just looking at strong growth up and down the line," Murdock said, referring to job growth in various business segments. "All the industries are looking strong. For the most part, there's really not any huge pocket of unemployment in Nevada."

He counted 45,000 new jobs in Las Vegas over the 12 months ending in December. Statewide, the number of jobs grew by 53,700.

But McLaren saw danger lurking in the Nevada and Las Vegas area economy, however.

"I have a feeling that you guys have a big housing bubble," McLaren said.

The Las Vegas economy looks vulnerable to a bust, in part, because so many Las Vegas-area jobs are in the construction trades, she said. About one-fifth of the new jobs in Las Vegas over the last year are in construction.

Las Vegas construction jobs increased by 9.3 percent over December a year earlier, compared to a 3.3 percent growth in leisure and hospitality jobs.

The Western Blue Chip Economic Forecast, which the Arizona State center produces, suggests that housing permits that were up about 21.1 percent for the state in 2003 will grow by only 1 percent this year.

By comparison, Murdock saw good news around the state. Mining is picking up in Northern Nevada cities, such as Ely and Elko, he said. Elko saw unemployment slip to 3.8 percent from 5 percent a year earlier while employment surged 4.6 percent. That unemployment rate is a 0.3 percentage point increase from November's 3.5 percent rate.

The Reno area saw unemployment slip to 3.3 percent from 4 percent a year ago, another 0.3 percentage point increase from November. Employment around Reno increased 4.1 percent, the state reported.

Carson City-area unemployment jumped to 4.9 percent in December, up from 4.3 percent in November, but down from last December's 5.7 percent rate. Employment around the capital city rose by 2 percent over the 12-month period.

The largest part of the state's labor force, however, is concentrated in the Las Vegas area, which enjoyed explosive growth and big housing price gains last year.

McLaren compared Las Vegas to the Phoenix area in about 1990 when a frantic construction binge ended with a sickening drop in housing prices and employment. "It's growth feeding growth," she said.

She, however, noted that Phoenix's problems happened in the wake of the savings-and-loan industry scandals.

In Las Vegas, "it may be more of a slow type of fizzle" rather than a spectacular collapse in employment and housing prices, she said.

McLaren said skyrocketing housing prices last year far exceeded growth in personal income in the area. If personal income fails to catch up, prices will come down, she predicted.

"(Otherwise) who is going to live in these houses?" she asked.

She suggested many of the Las Vegas home buyers are speculators.

"When my friends start investing in real estate, you know the market is starting to crash," she said. "I feel sorry for you guys, and I feel even sorrier for my friends who've invested in your market."