Governor Sandoval and the New Normal

SandovalNevada Governor Brian Sandoval (R) was pleased to comment as follows on the June unemployment numbers for the state:

“I am pleased that we have now seen job gains, relative to a year ago, in each of the past 30 months,” Governor Brian Sandoval said. “What’s more, gains have been recorded in nearly all sectors of the economy so far this year. However, in order to help pave the way for additional improvement, more work remains to be done.” [Sandoval, 7/18 pdf]

The Governor is pleased with our “non-stop” job growth, and happy that the U.S. Chamber of Commerce, which measures economic well being by (1) low rates of taxation, (2) how difficult it is to bring a suit for damages against corporations, and (3) the fuzzy notion of “business lending,” is touting Nevada’s great economy… [LVSun]

Let’s dispense with the Chamber Chatter first.  Businesses led by owners, managers, and executives who have more self awareness and a more rational comprehension of their immediate environment than the average miniature dachshund — “We’re big enough,” No, wait, maybe we’re not…” — know that the only reason to hire anybody to do anything is because the needs of customers for goods or services cannot be met by current staffing levels.   No business owner hires anyone because of tort litigation requirements, marginal tax rates, and “business lending.”  These categories are ultimately extraneous to the determination to hire additional employees, and only come into play if all other considerations are equal.   These criteria are just about as closely related to hiring decisions as (1) the mean temperature in the region, (2) the availability of canned spinach, and (3) statutes pertaining to aromatherapy.

Any business owner who predicates his or her hiring decisions on criteria other than the demand for goods and services on offer, and the consequent level of staffing necessary to keep customers satisfied,  isn’t going to be in business very long.  We might as well declare Nevada the perfect place to do business because (1) we have great climatic diversity, (2) bicycle fatalities are below 3% of all vehicle deaths each year (UNLVpdf), and (3) we have five species of native trout. [NDOW]

In short, the Chamber of Commerce chatter evaluates Nevada’s business climate based on their own legislative and political agenda, and not on relevant criteria for making micro-economic hiring decisions.

Meanwhile, back at the Governor’s happy comments.  “Job levels in Nevada have risen by 23,600 (2.1 percent) through the first half of 2013 with growth seen in all major sectors except professional and business services. The leisure and hospitality sector added the most jobs, with payrolls growing by 7,400 (2.3 percent).” [DETR 7/18 pdf]

For some sectors, like construction, there was almost nowhere to go but up.  For others, like professional and business services the results have been less than stellar.  This “picture” looks like this:

Nevada Job Growth by sector

Leisure and hospitality (read: hotels, resorts, and gambling) did add a significant number of jobs, but as in the case of the construction sector there was much ground to be made up.

Nevada Tourism 2013Note the plunge in visitor volume from 2008 to 2010.  [NVRA, pdf] Thus, if we give credence to the maxim that staffing decisions are made to accommodate an increase or decrease in the demand for goods and services, it’s relatively obvious that increasing visitor volume will yield increasing staffing levels at hotels and casinos.

However, there’s another fly in this ointment.  Nationally, the average earnings for a person working in the leisure and hospitality sector of the economy are $13.46 per hour, with average weekly hours amounting to 26.1 per week. [BLS] That calculates out to approximately $1405 per month, or $16,862 per year for 12 month employment.   The Department of Health and Human Services advises that a family of four with annual income at or below $23,550 has hit the poverty line. [ASPE]  The good news — we have more L&H jobs in Nevada, the bad news — this is all too commonly low wage employment.

Now, let’s look at the sector that didn’t fare so well: Professional and business services.  By definition these are:

“Activities performed include: legal advice and representation; accounting, bookkeeping, and payroll services; architectural, engineering, and specialized design services; computer services; consulting services; research services; advertising services; photographic services; translation and interpretation services; veterinary services; and other professional, scientific, and technical services.”  [BLS]

In other words, these are jobs at the higher end of the wage spectrum.  Meanwhile, the Governor’s office continues the happy talk:

“While there is more work to be done, if current projections hold, more than 50,000 jobs will have been created by the end of the year since the governor took office,” his communications director Mac Bybee said. “Gov. Sandoval made it clear from his first days in office that he would make job creation and growing our Nevada economy job one and he has done just that.” [LVSun]

It isn’t that 50,000 isn’t a nice number, but at some point the question needs to be posed — What kinds of jobs are these?  Are they the type of employment which sustains a middle class lifestyle or the type that can all too easily qualify a family for nutrition assistance?

The Other Sector

Another persistent drum beat in this blog is that it doesn’t do to speak of growth in the nation’s or a state’s gross domestic product without clarifying this figure includes the public sector.   The slashing done in the wake of the Mortgage Meltdown and Housing Bubble debacle is well documented in this article from the Las Vegas Sun in 2011.   When higher education budgets are cut, so are middle class jobs; so are teaching positions, positions for police and firefighters, parks and recreation program and facilities directors and staff….  These are salaries which are spent in local economies, for local goods and services, and which are now gone from the overall equation for enhanced economic growth.

If the new normal is that we have to adjust our expectations to address the declining contribution of public sector purchasing and personnel decisions then we have to assume lower rates of economic growth as measured by the GDP.

The test for the Governor should not be whether or not he can preside over the restoration of low wage jobs in a recreation based economy. It should be whether or not  his economic plan incorporates ways to diversify the state’s economic base so as to increase the number of jobs which relate to professional and business services and to the public sector jobs which correlate to quality of life in the state, and the attraction of enterprises which value transportation infrastructure, education and workforce training, and research coordination in their formulas for potential locations.

We’ll have to wait to see what the New Normal might be?

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