Ask Steve: Real Data, Real Talk

Statistically, inflation is cooling, but prices are still high when compared to what our brains remember as a baseline. When your “typical” grocery run was, let’s say, $150 a week back in 2021, and now every time you run your card it’s $200. It feels really expensive. You didn’t buy anything more, but now you’re $50 lighter each week. So, as people are seeing less money left at the end of the month, it means that wage increases still have to catch-up to the new cost of living.

Part of the disconnect too comes down to what’s being measured. Official statistics might show inflation cooling because categories like electronics or furniture have stabilized. But for most families, the big three — food, housing and transportation — remain stubbornly high. Economists call this the difference between “headline” inflation, which measures everything, and “core” inflation, which strips out volatile items. For everyday households, the headline number often matters less than what they feel in their biggest monthly expenses.

 

Another factor: many companies stockpiled inventory ahead of new tariffs early in the year to protect their margins. As those inventories run out and firms import replacements at higher cost, we will likely begin to feel the effects of inflated prices more directly.

Interest rates affect everything from mortgages to car loans to credit card debt. Even if you rent and are debt-free, interest rates have an indirect effect because businesses and investors use debt, which impacts their prices for rent, products, and services.

 

There are several types of interest rates, but most of the time this question is directed at the Federal Funds Rate, which is determined by the Federal Reserve (the Fed). And most interest rates are at least influenced in some way either directly or indirectly by the Federal Funds Rate. This rate is one of the tools that the Federal Reserve has in their toolbelt to affect the growth of the economy. When we need the economy to expand, the Fed can lower the Fed Funds Rate. When we need the economy to cool off, the Fed can increase the Fed Funds Rate. But the Fed doesn’t want to use rates like a yo-yo. The Fed wants to stabilize the economy and grow it at a sustainable level.

 

So, while a lot of economic data may suggest that they are clear to start cutting rates again to stabilize the economy, there remains a lot of uncertainty around federal governmental policy and tariffs. Right now, the Fed faces a tough balancing act. Inflation is still running hotter than their target inflation, and the unknowns around tariff policy is looming, but labor market data is showing signs of softening. The Fed’s have a dual mandate to stable prices and maximize employment, and they are in conflict right now. Cutting the rate could spur inflation higher; but raising the rate could hurt employment. That’s why rate decisions are so difficult, and why the Fed has been cautious even after beginning to trim rates. The path forward depends heavily on how inflation and jobs data evolve in the months ahead.

Over the past 5 years or so, we’ve seen people moving to Nevada from out of state in droves.  And it’s not just from California.  Let’s face it, Nevada is a rad place to live!  But with that growth in population, housing development is limited to the speed at which we can develop, the infrastructure needed, and how much land we can develop on.  Nevada is a big state, but over 80% of the land in Nevada is federally owned and managed.  So, while there are many factors that impact housing affordability, the biggest driving factor is we’ve simply seen population outpace our capacity to build more homes.  However, there is a bright spot!  Population growth will moderate, interest rates will eventually come down, and wage growth will catch up.  Housing affordability is an important part of economic development, and there are lots of dedicated and intelligent people actively working to pave a way toward more affordable housing for Nevadans, as is evident in the adoption of the Governor’s Housing Bill (AB540) during the recent legislative session.

This is a very big question, worthy of an in-depth discussion, but I’ll attempt to keep it brief.  On the one hand, there continues to be federal investments made in infrastructure and clean energy, which creates jobs and an overall positive economic impact for the state.  On the other hand, as the federal debt continues to balloon, the federal government has less and less available to make such investments.  Much like our personal finances, when expenses begin to get overly burdensome, we start looking at ways to cut expenses.  The federal government is expected to make cuts to certain programs, which will surely impact Nevada.  Federal funding makes up over 27% of Nevada’s budget.  Of that, we are unsure exactly how much will be subject to possible federal spending cuts, but it was the biggest contributor to the estimated $191 million shortfall identified during the most recent legislative session by way of the Economic Forum.

When looking at federal spending cuts that would have the biggest impact on Nevada: Medicaid, university funding, and education are at the top of the list. All of which are essential components to community and economic development.

It is fundamental for people to actively participate in economic development!  Attend public meetings, give your input, talk to local elected officials.  Also, mentorships, apprenticeships, and supporting training programs are key.  I encourage those that get involved to lead with curiosity and seek understanding.  Nimby-ism (not in my back yard) typically starts with a lack of information.  If your initial reaction is “no way” then take a step back and seek to learn more.

That it’s all about big companies. It’s not. Economic development is about creating the conditions for ALL businesses (big and small) to grow and create jobs. It’s about talent, infrastructure, and opportunity.  Also, it doesn’t happen by accident.  It happens because of the intentional hard work of a lot of dedicated people both in the public and private sectors.