Soaring energy markets tried to dent Northern Nevada's economic armor in the third quarter, but the region's core strengths withstood the challenge.
"They held up," Keith Schwer, economist at the University of Nevada, Las Vegas, said of job growth as well as swelling gaming and taxable sales revenues that have made Nevada the economic envy of the nation.
The impact of the chaotic energy markets on inflation was marked, but some sectors of the region's economy held fast while others, notably housing, pulled back from a breathless pace.
"Things did slow a bit, but it's all relative. I was far more concerned than I am today," Schwer said last week in assessing the volatile July-September period, especially in the wake of Hurricane Katrina's hit on gasoline and natural gas markets.
Coping with costs
That made for a trying September for vulnerable industries, notably transportation and manufacturing sectors, and Northern Nevada was no exception.
"It got almost to the point where we could hardly stand to pass a fuel stop and look up to see what the price was," said Sharron Foster, owner of JC's Xpress in Sparks, a small carrier with a fleet of 17 trucks. "Yes, it's very much a challenge."
When diesel fuel roared over the $3-a-gallon mark, reaching a high of $3.36 and surpassing even gasoline, Foster and others resorted to passing along the spikes in surcharges as well as boosts in cargo rates.
"Not only is fuel high, but the cost of tires, oil, everything we deal with has gone up," Foster said. "Just about everything you can think of, we're paying more than last year. It's something we can't get around."
Her drivers, though, are finding ways to economize a little here and there.
"We try to do most of our fueling in Nevada, it's so much higher in California," she said. "We're cutting down on idle time. We play it day by day."
At ITS Logistics in Sparks, the pain is measured at the pump. A year ago, it cost roughly $600 to fill a diesel truck's 300-gallon tanks. Now, it's $900.
"It's a major concern for us, for what it's all doing to the economy as a whole," said Jeff Lynch, ITS president. "Our customers understand they have to bear that cost."
Even so, Lynch said his company doubled its revenues in the third quarter from a year earlier.
Location eases pain
He cited the region's central location in the West and the ability to reach most markets within a day's drive as a major advantage.
"It still makes sense for a lot of companies to be here. If your distribution is to the West Coast, it makes sense," he said. "We're a market that will continue to do well."
Manufacturers, too, have felt the heat of higher energy costs, and in October the National Association of Manufacturers called for more state control of off-shore energy production.
Ray Bacon of the Nevada Manufacturers Association said the industry is heavily reliant on natural gas for production of goods.
"It appears worse in the East than in the West," he said. "Everyone's just fearful of it more than anything else."
A year ago, James Hardie Industries opened a fiber-cement siding materials plant east of Sparks. This fall, energy costs rose 20 percent to levels higher than even what the company pays at its plants in Washington state and Southern California, said Harv Shelton, plant manager.
"We're interested in expanding, but we're in competition with our sister plants for those dollars," he said. "We're at a competitive disadvantage. What we're finding is the regulatory structure in Nevada is in its infancy in terms of manufacturing. Other states have a more complex menu of rates.
"But we're trying to control controllable costs," he said. "We want to double our size."
Bucking the trend
John Mitchell, western regional economist for US Bank in Portland, Ore., characterizes the energy-spiked third quarter as "back-to-the-'70s."
And while he also sees subtle signs of a slowdown at the national level, he believes Northern Nevada is an exception.
"You've got new projects," he said of retail and other ventures. "Your tourist numbers look good. You'll keep going."
Indeed, the third quarter brought double-digit profit increases to the region's banks, and rising gold prices prompted plans for further mining development and exploration.
Gaming stabilized
In addition, Northern Nevada's retail juggernaut promised only to accelerate with ongoing developments such as The Summit Sierra in south Reno, and the region's gaming houses appear to have stabilized with no near-term growth in Indian casinos in California.
"The appetite in California for expansion has really diminished," said Reno gaming analyst Ken Adams. "We've reached the point where the competition is stable. We've finally have absorbed it. We're at bottom and beginning to see growth."
Other key sectors also saw encouraging results in the July-September period, including:
And a onetime charge held back third-quarter profits in an otherwise solid period of 6 percent revenue growth.
The Reno-based Economic Development Authority of Western Nevada reported 12 companies expanding or moving to the region during the quarter. That meant an economic impact of $26.5 million and an estimated 178 new jobs.
The "blockbuster" pace of the past two years eased somewhat at the Northern Nevada Development Authority in Carson City, said Executive Director Ron Weisinger.
He pointed to the energy issue as well as employers' worries over the region's available workforce in the midst of tight 4 percent unemployment.
But it didn't stop California wood truss maker Builders Choice Inc. from proceeding with plans to develop a high-tech manufacturing site at Silver Springs in Lyon County east of the capital.
But "cooled" is a relative term given average price increases of 30 percent or more in the past year, said Brian Kaiser, analyst at the Nevada Small Business Development Center at the University of Nevada, Reno.
"September was slower, but it was just not moving as quickly as before," he said. "I do think things will be slower, but they have to. It's natural.
"We've gotten so used to phenomenal growth. When we start seeing 10 percent, 15 percent appreciation, everyone panics. But that's no cause for alarm. At some point, it had to moderate."