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Economist: Federal relief payments helped drive Nevada’s fastest-in-the-nation first quarter GDP growth

Sean Golonka
Sean Golonka

Nevada led the country in gross domestic product (GDP) growth rate during the first quarter of 2021, with the increase fueled by federal relief programs, enhanced unemployment benefits and a jump in hospitality industry employment.

According to a report on GDP growth by state released by the U.S. Bureau of Economic Analysis (BEA) last week, Nevada’s GDP grew by 10.9 percent during the first three months of 2021, outpacing second place Utah (9.2 percent) and the national average (6.4 percent). The bureau defines GDP as the market value of goods and services produced by the labor and property located in a state.

“A lot of these stimulus dollars are being filtered through the economy,” Bob Potts, chief economist of the Governor’s Office of Economic Development, said in an interview. “Consumers are making purchases, businesses are making purchases, and those are what are showing up right now in the GDP numbers.”

Potts explained that “consumption, production, investment and net exports” are the primary factors that make up GDP, with consumption, which represents spending, making up the majority of the metric. As federal relief programs and enhanced unemployment benefits brought more money into the Nevada economy, residents had more money to spend, which drove the increase in GDP.

Even though growth was mainly driven by federal relief dollars, Potts said it is good news for the Nevada economy. As gaming revenue has rebounded and tourism and employment numbers have improved across the state, the stimulus packages have served to help stimulate the rest of the economy, he said.

“That doesn't take away from the fact that there's actual good economic activity going on, which we all know that there is,” Potts said. “This is a sure sign that we are on the road to recovery, and this is what gets us kick-started.”

Potts also noted that the state’s high unemployment rate throughout 2020 was a significant factor in the state’s GDP growth this year. 

“There's a relationship, a tight correlation — the harder you're hit, the greater you're bouncing back,” Potts said. “And that's one of the metrics that the [Federal Reserve] is using to help support individual state economies.”

With the state suffering through one of the highest unemployment rates in the country, a large share of Nevadans received unemployment benefits enhanced with federal relief funds. The state has also continued to offer the enhanced federal benefits past the first quarter, as the Nevada unemployment rate remained above the national average.

The BEA indicated similar reasons for growth in GDP across the country — all 50 states saw GDP growth during the first quarter of 2021, with Texas ranking last at just 4.3 percent growth.

“The increases in first quarter GDP by state reflected the continued economic recovery, reopening of establishments, and continued government response related to the COVID-19 pandemic,” bureau officials wrote in a press release.

The release pointed to government assistance payments delivered through the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA) passed in December and the American Rescue Plan (ARP) passed in March — including federal stimulus checks given directly to Americans, expanded unemployment benefits and Paycheck Protection Program loans — as contributors to GDP growth.

Those payments were spread widely across the state; a consistently high share of Nevadans received each of the federal aid payments (also called economic impact payments). 

For the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) payments, which included checks of up to $1,200 per eligible adult and up to $500 per eligible child, Nevada received the 10th most payments per capita. For the stimulus payments provided through the late-December COVID-19 relief bill, which included checks of up to $600 per adult and per child, Nevada received the ninth most payments per capita. And for the third round of payments provided through the ARP, which included checks of up to $1,400 per each eligible adult and child, Nevada received the sixth most payments per capita.

However, the amount of money that came to Nevadans through each of those payments was low in comparison to other states. The numbers vary by state in part because people with higher incomes received smaller stimulus checks, and because parents received aid for their eligible children, leading to larger checks for larger families.

The average CARES Act payment in Nevada was $1,643, which was the 42nd highest in the country. The average payment from the second round of stimulus checks was $948 in Nevada, the 38th highest. The average ARP stimulus payment in Nevada was $2,340, which was the 39th highest in the nation.

Utah, which generally has large family sizes and had the second-highest GDP growth rate during the first quarter, received the most money per payment for each round of federal stimulus payments.

Casinos and restaurants aid growth

The report shows that growth within the “accommodation and food services” sector was the largest contributor to Nevada’s GDP increase, while at the national level, growth within the durable goods manufacturing industry —  which includes the manufacturing of cars, furniture and household appliances — was the largest contributor to GDP growth.

Potts said a boost in employment and production within accommodation and food services, which includes restaurant and casino businesses, helped contribute to that industry’s growth in Nevada.

“If you're going to have people that are going to spend a lot of money to buy goods and services — the consumption side of that — there has to be people that are producing that on the other side,” Potts said. “So it has to balance out that way.”

In the beginning months of 2021, the state’s vaccination effort helped reduce COVID-19 caseloads, paving the way for the easing of capacity restrictions. With improving pandemic conditions, restaurants and casinos were able to attract more customers and hire more employees.

Job growth within the accommodation and food services sector was reflected by that sector’s GDP growth during the first quarter of 2021. The accommodation and food services sector accounted for 21.5 percent of the state’s GDP growth, while 19.8 percent of the nearly 23,000 new jobs added in Nevada from December 2020 to March 2021 were accounted for by accommodation and food services.

As Nevada’s GDP grew significantly over the start of the year, the state saw a decrease in unemployment from the quarter prior, as the state’s headline unemployment rate declined from 9.6 percent during the last three months of 2020 to 8.3 percent in the first quarter of 2021.

The return of tourists to the state — and to Las Vegas in particular — also played a role in stimulating the state’s economy, Potts said.

“Our tourism industry played a key role because a lot of those stimulus dollars that went into people's pockets in other states, when they came and visited us, they spent them here,” Potts said. “Because of our leisure and hospitality industry and tourism industry, we're getting the extra benefit of their dollars, as well. So there's a whole bunch of things that are pushing us towards the top.”

As the state’s economic recovery continues, Potts emphasized that it will be important to keep the federal stimulus dollars flowing through the state until more people are back at work.

“We want to keep the money out there, the stimulus dollars out there, until every worker is back to work and wages are back, until it reaches all corners of the economy, until our economic engine is running on all cylinders,” Potts said.


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