Nevada should regain No. 1 growth ranking in 1999

Brian Seals

Friday, May 8, 1998 | 10:19 a.m.

Nevada likely won't lead the nation in job growth this year, but look for a strong rebound as the state reclaims its No. 1 position in 1999.

That was the message Wednesday from Howard Roth, senior economist for Bank of America, at a Wednesday luncheon hosted by B of A. The Silver State outdistanced the rest of the country in job growth for several years in the mid-1990s, but was nudged out of the top slot by neighboring Arizona last year.

With the handful of new mega-resorts set to bring approximately 20,000 new hotel rooms on line during the next couple of years, Nevada is poised to reclaim the national job-creation title.

"I suspect in 1999, Nevada will be No. 1 again," Roth said. "The big question is, 'What happens after that?"'

For now, the state's economy looks strong, though not as overpowering as in previous years. The Asian crisis appears to be having little effect on the state's economy, though it is widening the nation's trade deficit. Fewer major casinos opened in 1997 and California's rebounding economy means fewer migrants from the Golden State. That leaves questions about the housing industry's immediate future.

"As a result, Californians are coming over here for vacations and gambling, but not moving here," Roth said. "If that's the case, we need to be careful with housing. You don't want to keep building houses at the same rate if Californians aren't coming."

Roth's statistics showed that housing permits in early 1998 are coming at a rate that would exceed that of 1997 if the trend continues.

Then again, many economists have been predicting the decline of the national economy, which shows no signs of cooling significantly. The nation's unemployment and inflation rate remain at historically low levels, much to the puzzlement of many economists.

Conventional economic wisdom of the 1980s would have inflation rising when unemployment reaches an unusually low level because demand for workers drives up wages, which are passed on to prices consumers pay. That hasn't held true recently, Roth said. The inflation rate is hovering well below 2 percent.

He attributed that to increased productivity per worker, which has offset higher wages. Also, oil prices have dipped; and increased competition in deregulated industries and from abroad has held prices down.

"It seems like something is different in the world today," Roth said. "It seems to be the best of all worlds for the national economy."

Roth doesn't expect it to last indefinitely. He said the dollar would not remain strong and energy prices would not stay low forever. But he expects the economy to grow at about 2.5 to 3 percent.

Also, inflation could creep up if the national economy remains too robust. Roth predicted the Federal Reserve would likely increase interest rates in the second half of the year to cool the economy and head off the possibility of inflation.

"They've learned in the past you can't wait until inflation heats up," Roth said.