Post on 25-May-2015
description
The Southern Nevada Recovery: The Long & Winding Road
Presented by
June 15th, 2011
Presented to
Risk Management Association
The U.S. Economy
3333
Source: Philadelphia Stock Exchange.
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Dot Com Bubble
Semiconductor Sector Index: 6/1996 – 6/2011
The early warning system - essential in electronic technology - computers, mobile phones, DVDs.
4444
Source: Institute for Supply Management.
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y-0
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y-1
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MFG Purchasing Managers Index
May 2011 = 54.5
- Above 50: Manuf. & economy expanding
- 43 to 50: Manuf. contracting; economy may be growing
-Below 43: Manuf. & economy in recession
Above 50 since 8/2009
U.S. Purchasing Managers Index (MFG):5/2001 – 5/2011
Manufacturing purchases continues to improve at national level.
5555
Unemployment rate stabilizing; but still elevated relative to the trend rate.
0%
2%
4%
6%
8%
10%
12%
Apr
-01
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-02
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Apr
-04
Apr
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Apr
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Apr
-07
Apr
-08
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-09
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Apr
-11
US =9.0%
Source: U.S. Bureau of Labor Statistics.
U.S. Unemployment Rate: 4/2001- 4/2011
The Long & Winding Road: The Potholes
7777
Enough said.
8888
This is what a bubble looks like. Prices at pre-2000 levels.
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-11
0
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1
1
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1
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NV-Las Vegas
20-City Composite
1/2000 = 100 index
Trend
Rate
S&P / Case-Shiller Housing Price Index
Source: Standard & Poors.
9999
$680
$700
$720
$740
$760
$780
$800
$820
$840
$860
$880
$900Q1-05
Q3-05
Q1-06
Q3-06
Q1-07
Q3-07
Q1-08
Q3-08
Q1-09
Q3-09
Q1-10
Q3-10
Q1-11
Average Monthly Rent
0%
2%
4%
6%
8%
10%
12%Asking Rents Vacancy
Source: Center for Business and Economic Research, University of Nevada Las Vegas.
Another look @ avg. apartment rents & vacancy.
Q1-1110.6%$754
10101010
Little job creation.
At least 6 mos. of steady job growth needed along with deleveraging needed
Probably mid-2012 at the earliest
11111111
600,000
650,000
700,000
750,000
800,000
850,000
900,000
950,000
1,000,000
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-11
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4/11804,600
Establishment-Based JobsClark County: 4/2001 – 4/2011
Clark County job market stabilizing but back to 2004 levels.
Source: Bureau of Labor Statistics.
12121212
Establishment-Based Job Growth (% Y-o-Y)Clark County & US
Source: Bureau of Labor Statistics.
-15%
-10%
-5%
0%
5%
10%
Apr
-01
Apr
-02
Apr
-03
Apr
-04
Apr
-05
Apr
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-11
0
0
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0
1
1
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1
Clark County
US
4/11Clark = -0.3%
US = 1.0%
4/2001 – 4/2011
Number of jobs needed to
13131313
77,910
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
Apr
-01
Apr
-02
Apr
-03
Apr
-04
Apr
-05
Apr
-06
Apr
-07
Apr
-08
Apr
-09
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-10
Apr
-11
12-M
onth Moving Totals
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1
1
1
1
1
1
Clark County Initial Unemployment Insurance Claims (12-MMT)
Source: Bureau of Labor Statistics.
Good news: Initial unemployment claims continue to decline, but still at 10-year high.
14141414
Minimum improvement in weekly hrs workedmeans jobs creation will be slow.
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Jan-
07Apr
-07
Jul-0
7Oct-0
7Ja
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-08
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-09
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-10
Jul-1
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-11
Hours
Clark County = 34 hrs.
US = 34.3 hrs.
Source: U.S. Bureau of Labor Statistics.
Clark County & US Average Weekly Hours Worked: 1/2007- 4/2011
15151515
NV unemployment rate getting better; but stillabove national average since mid-2007
0%
2%
4%
6%
8%
10%
12%
14%
16%
Apr
-01
Apr
-02
Apr
-03
Apr
-04
Apr
-05
Apr
-06
Apr
-07
Apr
-08
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-11
US =9.0%
Nevada = 12.5%
California = 11.9%
Source: U.S. Bureau of Labor Statistics.
US, NV & CA Unemployment Rates: 4/2001- 4/2011
16161616
700,000
750,000
800,000
850,000
900,000
950,000
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Apr
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-16
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2012 = +4,700/mo 2013 = +2,400/mo 2014 = +1,600/mo
2015 = +1,200/mo 2016 = +1,000/mo
~57,000: Total jobs needed to target 6%
unemployment rate*
Job Growth Scenarios1, 2, 3, 4, 5 years...and longer
*Assuming labor force remains constant, and 1 job (CES) equates to 1 person (LAUS) becoming employed. Source: Bureau of Labor Statistics.
Jobs needed per month
17171717
And flat incomes don’t help
18181818
$40.8
$64.0
$41.8
$65.5
0
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Q1/
92Q1/
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01Q1/
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11
$30
$35
$40
$45
$50
$55
$60
$65
$70
$ in thousands
US '92$ US current $
LV-Paradise MSA '92$ LV-Paradise MSA current $
Sources: Department of Housing & Urban Development; US Bureau of Labor Statistics; RCG Economics.
“The Challenge”: LV & U.S. median family income also remains flat. Impacts purchasing power.
Median Household IncomeLV & US
19191919
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-11
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Source: The Conference Board.
Consumer confidence has risen from low-point at beginning of 2009.
U.S. Consumer Confidence Index
5/11=60.8, similar to 3/03 levels
Still far from the reading of 90 that indicates a healthy economy.
20202020
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0%
1%
2%
3%
4%
5%
6%
7%
8%
9%U.S. Personal Savings Rate
Sources: U.S. Bureau of Labor Statistics.
The sign of the New Frugality. Personal savings rate likely to remain elevated for some time.
4/11=4.9%
21212121
Finally, consumer debt loads will restrain spending.
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16.64
11.74
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National Household Debt Service & Financial Obligations Ratios
Source: Federal Reserve Board.
DSR = % of debt payments (estimated required payments on outstanding mortgage and consumer debt) to disposable personal income.
FOR = adds automobile lease payments, rental payments on tenant-occupied property, homeowners' insurance & property tax payments to the DSR.
Debt Service (DSR)
Financial Obligation
(FOR)
23232323
Now we have elevated gas prices
24242424
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
$4.5
Q1/
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Q1/
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Q1/
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Q1/
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A mild respite. . . but
Source: Energy Information Administration.
Real Price (Jun 2011 $)
Nominal Price
Forecast
25252525
And food price spike isn’t helping.
26262626
187.01
100
120
140
160
180
200
May
-06
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-07
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-08
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-09
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-10
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-11
0
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World Commodity Food Price Index
Source: Index Mundi.
27272727
Reduced government spending is not all good.Remember government IS an economic sector
• Budget Cuts • With Rising Demands
“The upcoming fiscal year (FY2012) is shaping up as one of states’most difficult budget years on record. Thus far, some 44 states and the District of Columbia are projecting budget shortfalls totaling $112 billion for fiscal year 2012.” - CBPP
28282828
States with Projected FY 2012 Shortfalls.
45.20%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%A
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Source: Center on Budget & Policy Priorities, 3/9/2011.
Shortfall as % of State GF Budget
Las Vegas Real Estate Markets
30303030
The industrial market will be first to improve as inventories are rebuilt.
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%Q
1 '0
5
Q3
'0
5
Q1
'0
6
Q3
'0
6
Q1
'0
7
Q3
'0
7
Q1
'0
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Q3
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8
Q1
'0
9
Q3
'0
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Q1
'1
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Q3
'1
0
Q1
'1
1
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
$0.80
$0.90
Vacancy (%)
Asking Rents ($ PSF per Month)
Valley Industrial Vacancy & Asking RentsQ1, 2005 – Q1, 2011
Source: RCG Economics.
31313131
The Valley’s office market will be last to recover.Overbuilding & anemic hiring.
0%
5%
10%
15%
20%
25%Q
1 '0
5
Q3
'0
5
Q1
'0
6
Q3
'0
6
Q1
'0
7
Q3
'0
7
Q1
'0
8
Q3
'0
8
Q1
'0
9
Q3
'0
9
Q1
'1
0
Q3
'1
0
Q1
'1
1
$1.50
$2.00
$2.50
$3.00
Vacancy (%)
Asking Rents ($ PSF per Month)
Valley Spec Office Vacancy & AskingRents: Q1, 2005 – Q1, 2011
Source: RCG Economics.
32323232
Valley’s retail market remains in doldrums. Consumer confidence & spending is key.
0%
2%
4%
6%
8%
10%
12%
14%Q
1 '0
5
Q3
'0
5
Q1
'0
6
Q3
'0
6
Q1
'0
7
Q3
'0
7
Q1
'0
8
Q3
'0
8
Q1
'0
9
Q3
'0
9
Q1
'1
0
Q3
'1
0
Q1
'1
1
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
Vacancy (%)
Asking Rents ($ PSF per Month)
Valley Anchored Retail Vacancy & Asking RentsQ1, 2005 – Q1, 2011
Source: RCG Economics.
33333333
Years of supply to reach 10% vacancy.
Source: RCG Economics.
Las Vegas Valley Commercial Market: Q1, 2011
Years of Supply
10.0
5.4
0.2 0.00.3 0.4
17.8
0.2 0.6
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
Indus (3.2 Yrs of
Supply)
Spec Ofc (5.0 Yrs of
Supply)
Anchored Ret. (0.7
Yrs of Supply)
Square Feet (Millions)
Vacant Inventory
Under Construction
40-qtr (10-yr) Avg. Absorption
34343434
And that’s why the recovery will be long& winding.
Contact:John Restrepo702-967-3188jrestrepo@rcg1.com