Alternative Indicators: Can Nevada Employment Predict Where the Economy is Headed?

SPEAKER_1 (0:00)

This is what the market used to sound like.

Pretty complex. But today, with iShares by BlackRock, investing is easier. With over 450 ETFs, iShares gives you easy access to countless market opportunities. iShares by BlackRock, the market is yours. Visit www.ishares.com to view perspectives which includes investment objectives, risks, fees, expenses, and other information that you should read and consider carefully before investing. Risk includes principal loss, prepared by BlackRock Investments, LLC, and Maverick Monroe.

Alex Ossola (0:30)

If I met you at a cocktail party and I asked you how the US economy is doing right now, what would you say? It's actually kind of a hard question to answer.

There are signs that things are going well. Through the end of October, the S&P 500 was up more than 16% for the year. Credit card data shows that consumers just keep spending, and the latest GDP numbers were strong. 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. Add to that the government shutdown, which has made official data temporarily unavailable, it makes for a pretty confusing picture. 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 (1:28)

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 an indication of the future. 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 (1:59)

This is a special episode of What's News. I'm Alex Ossola for The Wall Street Journal. On this first episode of our four part series on alternative economic indicators, we're taking a look at employment data from the state of Nevada. And it's Nevada, not Nevada, right?

Andrew Woods (2:19)

Correct. Yes, that's a pet peeve for locals.

Alex Ossola (2:22)

That's Andrew Woods, the Director of the Center for Business and Economic Research at the University of Nevada, Las Vegas. 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 US. The 2001.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. 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 Woods says it's not a coincidence that there's a relationship between Nevada's jobs market and the greater US economy. That's because so much of the state's economy is tied to consumers' discretionary spending.

Andrew Woods (3:11)

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. About 54% 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 (3:30)

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 US economy? 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.

So you're based in Las Vegas, right?

Andrew Woods (3:59)

Yes.

Alex Ossola (4:00)

What's the vibe lately? What do you see in when you go out of your house?

Andrew Woods (4:04)

It's a tale of two economies. On one hand, there is a lot of economic activity, it seems, in the areas of the town that are growing. So there are parts of this Vegas in Nevada that have been very strong through the last year. 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. We finished pretty strong last year with 41.6 million visitors. We, of course, hosted Super Bowl, we have F1, we have the National Rodeo's final, we built the Spear. There's lots of things that we were giving reason for people to come. 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.