Nevada’s Economy Ranked #51st | 2008 Great Recession

How Nevada’s economy lost $18bn during the 2008 Great Recession

The real gross domestic product of the US peaked in 2007 Q4 before the 2008 Financial Crisis precipitated what is now known as the Great Recession, when $634bn of Real Gross Domestic Product (Real GDP) was lost from the US economy before it bottomed out in 2009 Q2. The US economy fell by 4.3% in that period but in Nevada’s economy the recession was much more severe, as Real GDP fell by 13.2% over the same period, reducing it by $18.3bn to $120.1bn. Nevada’s recession was deeper than in any other state in that eighteen month period ending in 2009 Q2.

The Real Gross Domestic Product data is collated by the Bureau of Economic Analysis (BEA). Real Gross Domestic Product (Real GDP) is the value of total economic output adjusted for price changes (i.e. either inflation or deflation). The BEA provides Real GDP data by industry sector and by state. The objective of this post is to reveal the impact of the Great Recession on the industry sectors that contribute to the entire state Real GDP.

In the US economy 6 sectors increased their Real GDP during the Great Recession

During the period six of the twenty sectors increased their real gross domestic product, and twelve states managed to increase their Real GDP. Those that did tended to have a large mining sector, a large finance sector, a large government sector, or a disproportionately large combination of these three.

The Nevada economy did not fit that profile. The real estate rental and leasing sector was Nevada’s largest in 2007 Q4, followed by the accommodation and food services sector, the government sector and then the construction sector. The real estate and construction sectors combined made up 25% of the economy at the end of 2007, making the Nevada economy extremely vulnerable in a Great Recession brought about by a property bubble fueled by excessive sub-prime mortgages. And so it proved.

But the Nevada economy, with such a large accommodation and food services sector, would suffer more than most if a full blown recession reduced or eliminated the disposable income of its target customer. Given the structure of its economy, then it was no surprise that such a deep recession would damage Nevada’s economy more than any other.

The Great Recession Growth Index Table for 19 Private Sector Industries in Nevada

The Great Recession commenced at the end of Q4 2007 and ended in Q2 2009. Using Real GDP in Q4 2007 as Index 100 the following table shows how the nineteen industries changed over this 6 quarter period.

Four industry sectors performed worse in Nevada than in any other state during the 2008 Great Recession

To put some context on the performance of each sector in a state I have compared the percentage change in the sector between 2007 Q4 and 2009 Q2 in all 50 states and the District of Columbia, and then ranked these percentage changes. Nevada’s performance ranked  in the bottom ten in fourteen of these sectors, and four of these ranks were 51^st. They were:

• Nevada’s real estate rental and leasing sector’s Real GDP fell by 14.8% and $3.2bn to $18.3bn during the 2008 recession, compared to a decline nationally of 1.9%. Employee income fell by 17.4% from 2007 to 2009;
• Nevada’s retail trade sector fell by 16.5% and $1.5bn to $7.7bn by 2009 Q2, compared to a national average decline of 7.4%. Employee income fell by 10.5% from 2007 to 2009;
• Nevada’s arts entertainment and recreation sector fell by 24.8% and $929m to $2.8bn during the 2008 recession, compared to a national average decline of 4.1%. Employee income fell by 9.9% from 2007 to 2009;
• Nevada’s management of companies and enterprises sector fell by 46.8% and $2.2bn to $2.6bn, compared to a national average decline of 9.1%. Employee income fell by 24.9% from 2007 to 2009.

The other ten sectors where Nevada ranked in the bottom 10 when compared to other states were:

• The professional scientific and technical services sector fell by 2.4% nationally. Nevada’s sector fell by 9.1% and $598m to $6bn, a performance that ranked 50^th, with only Florida’s sector decreasing by more. Employee income fell by 8.2% from 2007 to 2009;
• Nevada’s wholesale trade sector’s Real GDP performance ranked 45^th after it fell by 20.1% and $1.2bn to $4.7bn by 2009 Q2. Nationally the sector fell by 16.5%. Employee income fell by 8.2% from 2007 to 2009;
• Nevada’s other services except government sector also ranked 45^th when compared to other states as its Real GDP fell by 10.7% and $411m to $3.4bn, when nationally the sector fell by 7.1%. Employee income increased by 0.5% from 2007 to 2009;
• The accommodation and food services sector is the second largest in the Nevada economy. It fell by 16.2% and $3.1bn to $16.1bn, a performance that ranked 44^th when compared to other states. Employee income fell by 10.8% from 2007 to 2009;
• The administrative and waste management services sector fell by 8.8% nationally. Nevada’s sector fell by 10.7% and $411m to $3.4bn, a performance that ranked 44^th. Employee income fell by 12.2% from 2007 to 2009;
• The finance and insurance sector, the crisis within which caused the 2008 recession in the first place, managed to avoid one in its own industry by increasing 9.5% nationally. While other sectors were left to fend for themselves, the taxpayer bailout ensured the finance sector was cushioned from the effects of its own reckless decisions. In Nevada however, the finance and insurance sector did fall by 2.6% and $144m to $5.5bn, a performance that ranked 43^rd when compared to other states. Employee income fell 12.4% from 2007 to 2009;
• Nevada’s information sector ranked 42^nd when compared to other states. Its Real GDP fell by 9.3% and $303m to $3bn compared to a fall of 4.3% nationally. Employee income fell by 8.4% from 2007 to 2009;
• The construction sector was the hardest hit nationally when its Real GDP fell by 18.8% during the 2008 recession. By 2007 Q4 Nevada’s economy was over-dependent on the construction sector as its Real GDP of $12.4b was the 4^th largest sector, equivalent to 9% of Nevada’s total Real GDP. By 2009 Q2 it had fallen by 22.9% and $2.9bn to $9.6bn, a performance that ranked 41^st when compared to other states. Employee income fell by 31.4% from 2007 to 2009.

Nevada’s Private Sectors where Real Gross Domestic Product decreased during the Great Recession

The six sectors to increase their national Real GDP during the 2008 recession were:

• The mining sector, which increased by 18.7%. This sector benefited from a boom in certain commodity prices at the time but Nevada’s mining sector fell by 6.4% and $281m to $4.1bn by 2009 Q2, a performance that ranked 31^st. Employee income increased by 2.8%;
• The agriculture, forestry, fishing and hunting sector, which increased by 16.4%. This was another sector that benefited from a boom in certain commodity prices and Nevada’s agriculture sector increased Real GDP by 49.7% and $89m to $268m, a performance that ranked 9^th when compared to other states. Employee income increased by 11.3% from 2007 to 2009;
• The finance and insurance sector, which increased by 9.5%. This is covered elsewhere but this sector fell by 2.6% in Nevada;
• The educational services sector, which increased by 7.5%. Nevada’s educational services sector Real GDP increased by 14.4% and $60m to $477m, a performance that ranked 2^nd when compared to other states. Employee income increased by 24.3% from 2007 to 2009;
• The healthcare and social assistance sector, which increased by 6.1%. Nevada’s healthcare and social assistance sector’s Real GDP increased by more in absolute terms than any other sector during the 2008 recession. By 2009 Q2 the sector had increased by $327m to $6.5bn, a rise of 5.3% compared to a national increase of 6.1%. Employee income increased by 11.8% from 2007 to 2009;
• The government sector which increased by 1.7% nationally and by 1.2% in Nevada to $14.6bn, a $167m increase. This performance ranked 32^nd and employee income increased by 9.3% from 2007 to 2009.

Manufacturing was the 6^th largest sector of Nevada’s economy and it lost $1.3bn during the 2008 Great Recesssion

The manufacturing sector was the third hardest hit nationally during the 2008 recession as Real GDP fell by 12.9% from 2007 Q4 to 2009 Q2. Nevada’s economy is geared towards real estate and the entertainment sector so it is no surprise that its manufacturing sector was only the 6^th largest in terms of Real GDP back in 2007 Q4. During the recession it fell by 19.2% and $1.3bn to $5.5bn, a performance that ranked 37^th when compared to other states. Employee income fell by 14.6% from 2007 to 2009.

Two industries that did perform above average in Nevada were:

• The utilities sector was ranked 17^th when compared to other states. Its Real GDP fell by 5.5% and $133m to $2.3bn compared to a decline of 9.4% nationally. Employee income increased by 7.1% for 2007 to 2009;
• The transportation and warehousing sector was the only sector whose Real GDP declined in every state as it fell by 11.3% nationally. Nevada’s transportation and warehousing sector fell by 10.1% and $484m to $4.3bn during the 2008 recession, a performance that ranked 17^th when compared to other states. Employee income increased by 5.4% from 2007 to 2009.

Nevada’s Private Sectors that increased Real Gross Domestic Product during the Great Recession

Employment market

Nevada’s potential labor force at the end of 2007 totaled 1,349,739 with 1,281,500 in work and 68,239 unemployed, equivalent to 5.1%. The unemployment numbers rose to 154,608 in June 2009, equivalent to 11.5%, but job losses continued to rise until unemployment peaked in November 2010 at 186,488, equivalent  to 13.7% of the workforce. 118,249 jobs had been lost since December 2007. By June 2009 Nevada’s labor force totaled 1,347,154 and 1,192,546 were in work.

By April 2017 the number unemployed fell to 67,344, equivalent to 4.7% of the workforce.