As 2014 ends, it is good that Nevada is finally growing again. Now we need to prepare for what type of economy our state will grow into.
Payroll employment has grown by 27,000 jobs over the past 12 months, a 2.3 percent growth rate which puts us in the top quarter of states for the first time since the Great Recession began. Since we hit bottom in 2011, a year after the rest of the nation, we have recovered 110,000 of the 186,000 jobs we lost.
Gross State Product grew by 2.4 percent last year, less than the national average, but still enough to keep pace with population growth and price inflation. Growth in 2014 is expected to be even better. Our unemployment rate is 6.9 percent, no longer even among the top five in the nation. A welcome relief!
Even our population is growing twice as fast as the difference between births and deaths. People are moving here again. The fact that population growth is only a third of the pre-recession rate is also good news because we should be able to sustain this pace and meet the education and infrastructure needs such growth demands.
These are not the heady days before housing prices peaked in 2006. The economy fell off a cliff in 2008, and we are still only climbing out of the abyss and surely should not want to return.
Nevada was a casino economy back then. When our monopoly on gaming began to slip, we placed our providence in construction. Californians moved here for relatively cheaper homes, and people from other states moved here to build those homes or provide other services. Our income per capita was 10% above the national average, though our cost of living was also above average, and our population growth rate was fastest in the nation.
When the ride ended, Nevada lost almost 100,000 construction jobs, more than half of the total loss, and our unemployment rate became the nation’s highest. Median housing prices fell by more than half, foreclosures were highest in the nation, and two-thirds of homeowners owned property worth less than the mortgage.
A major driver of our economic recovery is the recovery in home prices. This has a big impact on the confidence and the net wealth of homeowners, and that leads to increases in retail sales. It also helped the national economy began to recover first, and national employment levels finally caught back up to the January 2008 peak this past Spring. At our current pace, Nevada will reach that mark in three more years.
Slow and steady GDP growth since 2009 makes the U.S. economy a model, as the European Union has been struggling through a second and now potentially a third recession. Japan has gone back into recession and while China continues to grow rapidly, its rate is slowing.
For Nevada’s economy, it is out with the old to make way for the new, and employment growth this past year has not been in the usual sectors. Almost two-thirds was in the health care sector and in professional and business services, while there is also growth in financial services, manufacturing and retail sector employment. After an initial recovery, employment growth in the leisure and hospitality sector has been flat. Construction is only beginning to see some positive growth.
Our recovery is still slow because we aren’t able to return to what worked for us before. We are beginning a needed diversification that we have discussed for many years. A number of interesting projects are underway that help. Tesla is beginning the construction of its gigafactory east of Sparks, while Nevada was one of six sites selected nationally for unmanned aircraft research.
It is hard to overstate how much the average Nevadan needs this growth. On average, our residents suffered a far bigger drop in income than those in any other state, and those at the lower end suffered the most. While income per capita was 16% lower in 2013 than in 2008, our median household income fell by 22 percent. Nevada had a larger share of population enter poverty from 2007 to 2013 than any other state. So far, none of these measures have shown signs of improvement.
Job growth helps, but many in our current workforce must now adjust to a changing economy. People are hard working in Nevada, but that is not enough. For this diversifying economy to succeed, new business sectors must expand and grow, and the public and private sectors must partner up to empower Nevadans to become tomorrow’s workforce.
As our state legislators come into the next legislative session, they need to put their priority on engaging employers, educators, unions, non-profits and our new entrepreneurs in order to improve workforce training and education. If we want all Nevadans to share in the opportunity of a diverse and robust economy, then now is the time to create that future.
Kate Marshall completed her second term as Nevada State Treasurer. Elliott Parker is professor of economics at the University of Nevada, Reno.