--:-- Alex Ossola: Welcome to today's show. I'm Alex Ossola here with my guest Andrew Woods, director of the Center for Business and Economic Research at the University of Nevada, Las Vegas.
--:-- Andrew Woods: Thanks for having me on the show.
--:-- Alex Ossola: If I met you at a cocktail party and I asked you how the U.S. economy is doing right now, what would you say?
--:-- Andrew Woods: It's actually kind of a hard question to answer.
--:-- Alex Ossola: There are signs that things are going well. Through the end of October, the S&P 500 was up more than 16 percent for the year. Credit card data shows that consumers just keep spending. And the latest GDP numbers were strong.
--:-- Andrew Woods: But there are also signs of weakness. Prices keep rising. Consumer sentiment recently fell near record lows. The jobs market has slowed. Manufacturing is lagging. Even the Fed doesn't know where the economy is going, fueling its debate over whether to keep cutting rates.
--:-- Alex Ossola: Add to that the government shutdown, which has made official data temporarily unavailable. It makes for a pretty confusing picture.
--:-- Andrew Woods: So some of those in the know are turning to alternative data to help them take the temperature of the economy. Here's WSJ investing columnist Spencer Jacob.
--:-- Spencer Jacob: It really always does make sense to look at alternative indicators. Most economic indicators that you get from the government are pretty backward looking. It's old news already. And so it's hard to find things that really give you an indication of the future.
--:-- Alex Ossola: That's what some private sector indicators have been used for that more. And all of them, they can be signal or they can be noise. But there are all sorts of things in the economy from the private sector that are not necessarily packaged up and tied up with the bow, but they can be really, really useful.
--:-- Alex Ossola: This is a special episode of What's News. We're taking a look at employment data from the state of Nevada. And it's Nevada, not Nevada, right?
--:-- Andrew Woods: Correct. Yes, that's a pet peeve for locals.
--:-- Alex Ossola: Over at least the past 25 years, there's been something interesting going on with Nevada's employment rate. Dips in the data correlate to a broader economic pullback in the U.S. The 2001 dot-com bubble, the 2008 financial crisis, the recession caused by the COVID-19 pandemic, you can see those downturns in the Nevada data, sometimes before the rest of the country.
--:-- Andrew Woods: Of course, there are other factors that might be muddying that signal and are affecting Nevada's employment without changing the broader economic picture. But I say it's not a coincidence that there's a relationship between Nevada's jobs market and the greater U.S. economy.
--:-- Alex Ossola: Because so much of the state economy is tied to consumers discretionary spending. One in five jobs across the entire state are tied to leisure and hospitality. And we entertain between 40 to 42 million visitors a year.
--:-- Andrew Woods: About 54 percent of the state budget is influenced by consumer spending. And then you also think about our gross domestic products. A third of that is tied to leisure and hospitality, travel and tourism.
--:-- Alex Ossola: For August, which is the most recent month for which data is available because of the government shutdown, Nevada's employment stayed flat from the year prior and declined slightly from the month before. So what does that mean for the U.S. economy?
--:-- Andrew Woods: I get into it with Woods and discuss other factors that may make that relationship between Nevada's employment data and the broader economy a little murkier.
--:-- Alex Ossola: So you're based in Las Vegas, right?
--:-- Alex Ossola: What's the vibe lately? What are you seeing when you go out of your house?
--:-- Andrew Woods: It's a tale of two economies. On one hand, there is a lot of economic activity, it seems, in the areas of town that are growing. So there are parts of this Vegas and Nevada that have been very strong through the last year.
--:-- Alex Ossola: But it is noticeable that the strip has been quieter, that there hasn't been quite the same large groups of individuals coming to town in the last, say, six months.
--:-- Andrew Woods: We finished pretty strong last year with 41.6 million visitors. We, of course, hosted Super Bowl. We have F1. We have the National Rodeos final. We built the Spear. There's lots of things that we were giving reason for people to come.
--:-- Alex Ossola: But this year, it seems like that's kind of switched a bit. And that's been noticeable up until about mid-September. It was pretty quiet if you were walking around on the strip compared to years past.
--:-- Andrew Woods: I'm glad you brought that up because the data that I was looking at before this call was about how year-over-year employment could be an economic indicator for possible future national recession. So the data that I had seen is from August showed that the year-over-year employment for the state was staying flat.
--:-- Alex Ossola: Is this news to you? Had you heard this before?
--:-- Andrew Woods: So something that's really interesting about the state, and it wasn't always true of the state, but in the last 20 years, is that our economy seems to have come more synchronized with the U.S. economy in terms of how well the U.S. economy and consumer is doing is how well Nevada and our economy is doing.
--:-- Alex Ossola: So going back to your original question about where we are now, it is a really odd jobs report we're getting here in the state because we see that there was a shedding of construction and leisure hospitality jobs, which has continued through the summer.
--:-- Andrew Woods: But then there is an arise in unemployment rate. And some of that is that people left the workforce. We do survey work among our workforce. They are saying it's harder to find a job. And we also survey our businesses and they seem to be saying that they're having a hard time finding qualified employees.
--:-- Alex Ossola: Yet when I ask them how their margins are doing, they still say they busy and they still making money but they being a lot more picky about who they hiring and if they have the right set of skills.
--:-- Andrew Woods: So this most recent employment data what does flat mean?
--:-- Alex Ossola: Given that there is this uncertainty, we're all anticipating price increases. It's more of a risk than it has in the past to hire people right now. And it basically means we have a frozen job market.
--:-- Andrew Woods: These jobs are very much tied to the discretionary side, leisure and hospitality, or to like a very much a business investment like construction. You're seeing a much more nuanced story emerging there, which is that businesses after the pandemic were in a rush to rehire a lot of those individuals.
--:-- Alex Ossola: That has slowed a ton. And I think that says that firms are really uncertain about where the American consumer is going to be three to six, nine months from now.
--:-- Andrew Woods: So I would rather keep what I have. So I'm not laying off people, but I'm not trying to grow either right now. I'm trying to build a moat and protect my business and protect my profit margin.
--:-- Alex Ossola: Are you saying that it's an indicator of like literally where the economy is going?
--:-- Andrew Woods: When it comes to Vegas, I think we are an indicator where the American consumer is, is the high end. The people that, you know, are more price insensitive that have done well because they have a lot of assets. They have stocks and other equities. They're still coming to Vegas.
--:-- Alex Ossola: If you look at private jets coming to Vegas, it's even with last year. If you look more of the weekend warrior, kind of that impulsive traveler, the one that wants to come and have a great time, but they're planning last minute, they are still traveling according to surveys and according to data that we saw over the summer.
--:-- Andrew Woods: But they're not necessarily coming to Vegas as they did in the past because there's a perception that it's a little too expensive. I would argue that is very property dependent.
--:-- Alex Ossola: But if we look at, say, earnings for like Wynn resorts, they're doing much better than earnings, say, for other resorts on the Strip because they're catering to the high end.
--:-- Andrew Woods: While the ones that have to kind of give more value to the budget traveler are struggling to persuade the budget traveler that this is a good deal.
--:-- Alex Ossola: This weird dichotomy in the economy right now, are we growing or are we slowing?
--:-- Andrew Woods: Right. And we can pick your number and it feeds kind of whatever your narrative is. But we're getting both numbers and we're getting both narratives.
--:-- Alex Ossola: Coming up, that relationship between Nevada's employment data and national recessions has existed for decades. But could it fall apart?
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--:-- Alex Ossola: Back to the statewide employment numbers could there be any other factors that could be affecting how good of a national indicator it is, like immigration?
--:-- Andrew Woods: If you look at nationally and here in Nevada, the labor force participation rate is shrinking. Now this is just a couple months of data, so I wouldn't call it a trend. It's very noisy, that indicator.
--:-- Alex Ossola: But it makes me wonder if some of these individuals are leaving and some of this is an immigration story.
--:-- Andrew Woods: You didn't ask me about technology, but Vegas has always been ground zero for automation. You see some of this already when you walk around the casino floor, greater use of technology to have labor force cost savings.
--:-- Alex Ossola: And we already know there's some smaller casinos that are completely now advertising that they are all electronic gaming. So including like Blackjack and Roulette, not just the slot machines.
--:-- Andrew Woods: But it's interesting, if you talk to the properties, like higher end properties, you don't see that as much. I mean, you'll have lots of slot machines, but you pay for the in-person experience to talk to a dealer.
--:-- Alex Ossola: And I think you're going to see more of that segmentation and fragmentation where you essentially pay to hang out with a human being to be your dealer.
--:-- Andrew Woods: You already see it in bars. Nice bars will have really nice bartenders, But if you just want a drink on the floor, they still have a cocktail waitress, but like that drink isn't made by a bartender most of the time. It's made by a machine in the back.
--:-- Alex Ossola: If we do like a Vegas style bet, are you betting that a recession is coming or not?
--:-- Andrew Woods: Of course, I'm going to give you an economist answer instead of the answer you want, which is like, is it black or red, right? Is it 21 or are we busting here?
--:-- Alex Ossola: I think we're going to muddle through this. My thinking is that growth will be slow, that there will be parts of the economy that will experience some more shock as a result of all the change and uncertainty.
--:-- Andrew Woods: I do think that Vegas itself will struggle for another year or two to meet what we met last year. That doesn't mean that we're decreasing. It just means we'll be stagnant.
--:-- Alex Ossola: That was Andrew Woods, director of the Center for Business and Economic Research at the University of Nevada, Las Vegas.
--:-- Alex Ossola: Today's show is produced by Julie Chang with supervising producer Jana Heron.
--:-- Alex Ossola: Next up in our Economic Indicators series, What Dr. Copper Can and Can't Tell Us About the State of the Economy. That'll be in your What's News feed on Wednesday.
--:-- Alex Ossola: I'm Alex Ossola, and we'll be back this evening with our regular show. Until then, thanks for listening.
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