The lyrics of Francis Paul Webster and the haunting melody of Maurice Jarre’s soundtrack from “Doctor Zhivago” say it best. It puts you in the right frame for seeing a way forward from the current economic travail. Yes, we find ourselves in an economic winter, but we will see an economic recovery, perhaps earlier, but hopefully by spring 2010. Hope will first appear in expectations for success of new projects, and then work its way through Main Street. Perhaps some of the recent stock market gains resemble those little green shoots coming up in the snow. But in the meantime, with little good news to report, we endure the wind and bitter cold of a recession.
The Silver State indicators show that the economy continues to decline. Percentage changes from a year ago show a sustained falling off. Double-digit declines in taxable sales and gaming revenue month after month pretty much tell it all. Recent conditions in Clark County and Washoe County seem uniformly fragile, although Washoe County gaming revenue held its own for January. Visitor volume is down 12.6 percent in Clark County and 5.4 percent in Washoe County for January over year-ago levels. Convention business has also taken a hit. As a result, competition for visitors has sent room rates down sharply, straining the cash flow of many firms and testing the financial solvency of some.
Noticeable improvement in Nevada conditions will not take place until consumers return to spending for discretionary items. Auto and truck sales are 40.5 percent below year-ago levels and housing starts are 47.3 percent below year-ago levels. Moreover, job insecurity has many sharply cutting back and increasing their savings. In this environment it is hard to see a discernible movement to expansion in the Silver State until the national malaise is over.
Trying to jump start the national economy, the incoming Obama administration has sent its budget to Congress. It remains to be seen how stimulative deficits will affect economic performance. Without such deficits, however, you run the risk of further destructive deflation and with them you risk igniting destruction inflation. These policy options bring increased risks, to be sure. In the meantime, further rises in unemployment are anticipated nationally and in Nevada. We await a national recovery before we expect to see Nevada expanding again.
