Economist talks about Nevada economy in Carson City
Nevada’s economic outlook gained momentum in 2016 after plummeting during the Great Recession.
Carson City still has some catching up to do with unemployment rates, according to Managing Director and Senior Economist Mark Vitner of Wells Fargo.
As part of the Soup’s On luncheon hosted by the Carson City Chamber of Commerce, Vitner presented a focus Tuesday at Gold Dust West about the future economic development and trends of Carson City and the state.
The state as a whole recovered jobs lost in the recession when the job market hit a milestone in July 2016, although much of the state’s job losses were in the construction industry.
Vitner said employment growth has been barely positive over the past year in Carson City. The region’s unemployment rate has trended lower to 0.6 percent, narrowing the gap between the national average, 0.4 percent.
“The numbers are slow because we don’t have a plant in the area, such as Tesla,” he said. “We have a lot of jobs in leisure and hospitality but we should equal in employment and productivity. Not that these jobs aren’t productive, but we had stronger growth in logistics and data centers, and in construction.”
Nevada is now more heavily driven by the education, health, professional and business services, which tend to provide higher paying, full-time positions compared to construction and tourism.
Also in the state, nonfarm employment increased 2.9 percent in 2016, on a year-to-year basis, which encouraged stronger job growth and job seekers to move into the state. Construction then surged this past year, with demand driven by large infrastructure and private commercial projects.
And probably because of that, Vitner said population growth has picked up in the state. Nevada welcomed 56,000 new residents last year.
But this puts the housing market into a strange spot. Residential construction activity in the state continues to improve but remains sluggish to its long-term norm. Home prices in Nevada are well below pre-recession peak, which has left many households in a negative equity situation.
“It’s looking dark,” Vitner said. “There’s not enough equity in Nevada for people to move. Single-family construction is gaining momentum, but affordability hurdles put a low ceiling on growth. But we’re still on a path to recovery; apartments are closer to the peak.”
Carson City’s housing market it’s coming off the bottom of the graph; weak population growth in recent years has weighed on demand for housing and services. After rebounding sharply, home price appreciation has settled down to a pace almost even with the nation. Price growth in Carson City increased to 7.5 percent but also cooled off in 2016.
Student housing and education is also growing, which helps the home prices level up with the nation’s average.
So how can the area offer more reliable jobs and housing for those moving to the state, or wanting to continue a life in Carson City? Vitner said one of the easiest ways to go about it is to mix job growth with tourism, thanks to the casinos, but there are other ways.
“The state has to continue to make an effort to diversify its economy,” he said. “The casinos are customers. The last three months looked encouraging as tourism levels increased. It’s like the new hockey and football teams in Las Vegas — it all fits together. It’s about getting people down to those kind of events and diversify those further efforts.”
Vitner also said it’s important to spend money on infrastructure that matters, such as roads that need more attention. This should also increase throughput for industry and tourists and allow for more growth in transportation and logistics.
“That’s how you get the economy going,” he said.
Nevada’s gross domestic product is expected to rise 2.8 percent in 2017, following an estimated 2.5 percent gain in 2016. Nevada has more of its employment base in high-turnover industries but over time, the growth of the healthcare and education sectors will be repaired.
“I think we have enough flexibility in our housing market,” Vitner said. “When it comes to interest rates and income, it will be more modest.”