The Indy Outlook: Steady growth is a good bet for Nevada

A recent Pew analysis found that eight states lost population between 2015 and 2016, the most since the oil collapse of 1986/87. Twelve more states saw their lowest population increases in a decade. A look into the weaknesses of these states points to solid fundamentals for continued growth in Nevada.

 

 

 

 

 

 

 

 

Source: Pew Trusts

There are two major factors in population shifts: Mortality and birth rates, and migration, both domestic and foreign.

The aging Baby Boomers are nudging up mortality rates, while birth rates are on the decline as millennials are having fewer children. These combine for the slowest natural population growth in decades.

When it comes to moving, the economy plays a big part. People flock to jobs, then flee as sectors retract – for example populations in Wyoming and West Virginia have plunged along with their coal industries. And while the recession caused many people to stay put, improved job prospects and incomes are increasing people’s ability and willingness to move.

The effect of taxes is less clear. Some studies show an indirect relationship – the impact of taxes on the broader economy and cost of living are bigger drivers than the rates themselves. However, a poll in Illinois found the two biggest self-reported reasons for moving were taxes…and weather.

How it all adds up for Nevada

Our fair state happens to enjoy several advantages. The Rust Belt is plagued with harsh winters and a decline in manufacturing and industrial jobs. Meanwhile, Nevada’s sunny skies and rapid economic growth in the recovery have spurred population gains at double the national average. While coal and even gas jobs are on the decline, the renewable energy sector – Nevada’s local energy resource – is on rise.

According to the Tax Foundation, Nevada is ranked fifth in the nation for business tax climate. Our cost of living is competitive and far lower than neighboring California. Most importantly, we’re a destination for immigrants and younger people, which is bolstering the labor force as Boomers exit. Nevada also ranks fifth when it comes to the share of its population that is foreign born.

Many of these advantages are baked into the state for the foreseeable future, able to weather fluctuations in the economy. However, it bears repeating that there is still room for improvement in the labor market.

Nevada’s U6 unemployment rate, which counts those discouraged from seeking a job or working part-time not by choice, sits at 12.2 percent, a full three points higher than the national rate. The average Nevada workweek is 33.5 hours, one hour less than the U.S. And as noted in a previous Indy Outlook column, the state’s weekly wages are about 10 percent lower than they were a decade ago, adjusted for inflation. These hits to income are the biggest economic threat to population growth.

Still, as long as Nevada stays competitive, we’ll continue to see steady population gains. And if we can complete the labor recovery, we’ll see strong growth for some time to come. That’s important, because these newcomers are the heart of our economic engine, and the foundation of increased political power through a growing congressional delegation.

John Restrepo, the author of this op-ed, is an economist and Principal of RCG Economics. He is an expert in regional economics and forecasting in Nevada and the Mountain West.

This op-ed is one of three on the Nevada economy published on Monday, April 10, 2017. The columns are Part Three of a series we’re calling THE INDY OUTLOOK and that will be written by a trio of Nevada economists.

Disclosure: John Restrepo co-publishes the Stat Pack, a client of the communications consulting firm owned by The Nevada Independent’s managing editor, Elizabeth Thompson.

Feature photo: “Nevada” by Tom Hannigan is licensed under CC BY 2.0