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Nevada’s jobless rate drops to 12.3 percent

Don’t open the champagne bottles yet.

Nevada’s jobless rate fell for the second month in a row, but few experts say they’re celebrating the trend.

That’s because the falloff in unemployment has come courtesy of a decline in the state’s pool of workers, and not because of economic expansion.

Unemployment in Nevada dropped to 12.3 percent in November, down from 12.9 percent in October and a record 13.3 percent in September, according to the latest numbers from the state Department of Employment, Training & Rehabilitation. Joblessness in Las Vegas has dropped even more steeply, sinking to 12.1 percent in November. That’s down from 13 percent in October and a record 13.9 percent in September.

Unemployment remains well above its levels in November 2008, when 8 percent of Nevadans and 7.9 percent of Las Vegans lacked jobs.

Observers credit recent declines in joblessness to a smaller work force. Nearly 35,000 Nevadans abandoned the state’s labor pool in October and November, either giving up the job hunt or leaving the state, and that makes for a smaller share of residents considered unemployed.

Bill Anderson, chief economist for the employment department, called the dwindling labor force a “troubling trend.” A decline in unemployment often indicates that a recession is subsiding, but that’s not the case here once you look more closely at the data, Anderson said.

You might not think it matters why unemployment drops, just as long as it does. But when joblessness falls because of work-force shrinkage rather than job growth, the trend poses serious implications for the state, said Brian Gordon, a principal in local research firm Applied Analysis. When residents decamp for other states, Nevada’s left with fewer taxpayers to bolster an ailing fiscal outlook. And people who quit looking for jobs and drop out of the work force are likely to be on long-term public assistance, which further depletes state and local resources.

Out-migration also affects the housing market, putting more homes on the market with fewer prospective buyers, though that dynamic benefits bargain hunters looking for deals, Gordon noted.

The state doesn’t track data on why people drop out of the state’s labor pool, but Anderson guessed that a majority of the contraction has come from people giving up the job search, rather than leaving for other markets.

“This is a nationwide recession, so there are really no significant pockets of strength for folks to move to for jobs,” Anderson said.

Nevada obtains its jobless numbers not from counting the number of residents receiving unemployment benefits, but from employer and household surveys. The employment department’s statistics don’t include discouraged workers and part-timers who’d rather work full-time. Include those residents, and unemployment is likely closer to 20 percent statewide, economists have said.

Nationally, unemployment came in at 10 percent in November. California hasn’t released its November data yet, but its jobless rate in October was 12.5 percent.

No corner of the Nevada economy has remained untouched in the recession, with every major employment category losing positions. But hospitality and construction, as the state’s two biggest employers, have taken the hardest hit, particularly in Las Vegas. The local market has lost 10 percent of its jobs base, shedding 93,600 positions out of 936,700 since peak employment in May 2007. Of those lost jobs, 37,500 were in construction and 29,900 were in leisure and hospitality. That means well over two-thirds of the jobs that disappeared locally were in those two sectors, though hospitality and construction made up around 40 percent of the local economy.

The falloff in leisure and hospitality employment came amid a wave of major resort openings, including Encore, the Palazzo, Aliante Station and M Resort. It’s taken big discounts to fill many of the rooms at those properties, Gordon said, but the pullback in resort jobs would have been far worse had the hotel-casinos not opened.

Experts also say it’s too early to tell how CityCenter will affect overall job statistics. The resort did open some of its components the first week in December, so portions of the property were staffed up in November. Yet, Las Vegas lost 8,800 jobs from October to November, including 4,800 leisure and hospitality jobs.

CityCenter’s biggest piece, Aria Resort & Casino, opened Wednesday night. CityCenter was set to have 12,000 employees upon its opening, but with 119,000 locals jobless in November, the complex can’t singlehandedly make a difference.

“CityCenter won’t cure the employment challenges that are out there, but it will soften the blow,” Gordon said. “When we talk about adding upward of 12,000 employees, that’s significant. They’re a material employer.”

It’ll take more than CityCenter to bring job growth back to Nevada, experts said.

Gordon said job losses should decelerate by mid- to late 2010. He and Anderson both said they expect instability in unemployment numbers between now and then, with some months posting unemployment increases and others showing declines.

To pinpoint when growth might return, consider the average number of hours worked per week. Workers put in 33.7 hours a week in September, down from 34.3 hours a week a year earlier and 34.8 hours weekly two years ago, according to figures from Applied Analysis. Average weekly wages were down 6.5 percent when compared with September 2008. As long as companies continue to cut hours and pay for existing workers, they’re unlikely to bring on new staffers, so both of those indicators need to rebound before observers can assert that a recovery has taken hold.

And the employment department doesn’t forecast outright job growth until late 2010 or early 2011. Even then, job formation will seem positively anemic compared with growth rates at the market’s peak, Anderson said. The state’s job base expanded about 6 percent a year at its apex, from 2004 to 2006. In 2011, expect less than 1 percent growth year over year, he predicted.

Even in the longer term, Anderson said he doesn’t anticipate a return to 6 percent job growth, especially given the lack of casino development in the pipeline for the next three to five years and beyond.

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512. mhiesiger@reviewjournal.com.

 

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