I wanted to share some preliminary findings of an interesting project on which I have been working. By now everyone knows that the state of Nevada has been heavily impacted by the recession, leading to the high unemployment and foreclosure rates in the nation. The usual suspects-the real estate bubble and reliance on gaming operations-are usually blamed. This project looks at another change, Nevada’s shift in personal income components, and its impact on state GDP, which is a good measure of the health of the economy.
A little history; in 1969, 81% of Nevada’s per capita personal income was made up of net earnings, 14% was current transfer receipts, and 6% from dividends, interest and rent. By 2009, per capita net earnings made up 63% of total per capital personal income, 22% in per capital personal current transfer receipts and 15% in per capita dividends, interest and rent. This is a considerable shift from earnings from employment to those received from non-employment activities, such as investments and governmental payments.
Figure 1: Per Capita Personal Income Components Nevada-1969 and 2009 (Bureau of Labor Statistics)
In 2009, eight counties in Nevada 40% or more of per capita personal income from passive sources, such as transfers, dividends, rents and interest. Douglas and Nye counties have the highest percentage of this passive income at 49% of total per capita personal income, followed by Lincoln County at 47%, Mineral at 46%, Carson City at 43%, Lyon at 42%, Washoe at 41%, and Storey at 40%.
Our model compared percent changes in Nevada GDP to those of each component of Nevada personal income between 1970 and 2009. Data used in the analysis was collected from the Bureau of Economic Analysis. The model shows that an increase in per capita net earnings increased NV GDP. However, an increase in per capita current transfers decreased Nevada GDP, as did an increase in per capita dividend, income and rental income. This is an interesting finding and a useful one as the State continues to develop its economic growth and development strategy.
The analysis shows that job creation will help drive the health of this economy. However, attracting a population which receives its income from investments, governmental or retirement payments at the expense of jobs will lead to the decline of State GDP. It should be noted that these findings are preliminary, additional analysis, including the analysis of impacts at county-level and determination of other factors impacting GDP need to be conducted. However, the findings are interesting in starting a dialogue regarding economic development in the State.
Nevada Economic Insights 