Greetings from Washington, D.C., where they don't seem to have gotten the word that the nation is in a deep recession. The restaurants are full, traffic is horrendous, construction is booming, and the Maryland-Virginia suburbs are the only area in the country where home prices continue to rise. What do they know that we don't out in Nevada?
Still, while the federal government is thriving, those in the top tiers are worried about the future of the American economy. There are mixed signs right now, some indicating recovery, others stagnation. Most, however, point to more economic weakness ahead.
The brutal month of May was a reminder of the economy's fragility, as well as the risk for an incumbent President. Job creation has been anemic, and in May would have actually have been negative if McDonald's hadn't added tens of thousands jobs. More worrisome was that the percentage of people without a job for six months or longer rose to 45 percent, nearly a record. The Dow extended its losing streak to six weeks. That's the first time that has happened since July 2004. Consumer confidence dropped in May, along with auto sales, construction spending, and manufacturing expansion.
There was a very discouraging report on home prices nationally, which declined across 20 major metro areas, the Washington suburbs excluded. Overall, prices were 33 percent below the July 2006 peak, the largest drop in history, and are now at levels last seen in the middle of 2002. In the past nine quarters, more than 2.1 million homes have been foreclosed. Housing experts continue to claim that the market must be close to bottoming out, one has to wonder.
The Silver State is no exception to this trend, and is certainly one of the hardest hit by the recession. Gaming revenues fell slightly during April, led by a 2.2 percent drop on the Las Vegas Strip, but overall Clark County revenues were up 8 percent. A good sign, as visitor volume grew 5 percent, the average daily rate for rooms was over $107, and the occupancy rate was about 86 percent. Not bad, but not great.
Unemployment in Nevada improved for the fourth straight month, falling a full point down to 12.1 percent in April, but still the highest in the nation. The lone exception to this otherwise dreary picture is the mining industry. For the most part we're talking gold, which accounts for almost 90 percent of total mining revenues.
The median price for an existing single family home in Washoe County fell to $155,000 in April, down from $350,000 in Q3 2005. About one-third of housing transactions are short sales, another third bank-owned and just 33 percent regular equity sales. The low prices continue to significantly impact new home sales--only 33 were sold in March - versus 422 existing homes sold (still a decline of 17 percent from a year earlier). Some 54 percent of Reno area homes are underwater on their loans, the fifth highest in the nation. Las Vegas is still the worst, with 66 percent of homeowners owing more than their house is worth.
Where do the national and Nevada economies go from here? Not sure, but it really doesn't look encouraging.
• Tyrus W. Cobb is former special assistant to President Ronald Reagan.
