Finding Stability: A new chapter in Northern Nevada’s economy

The last few years have been a roller coaster for our economy, nationally and here in Northern Nevada. The pandemic upended our normal economic cycle, and was responded to with a once-in-a-generation government intervention to protect employment and businesses. Huge government expenditures and the war in Ukraine warped and choked supply chains, spiking inflation and forcing the Federal Reserve to increase interest rates to keep that inflation from running out of control.

As the CEO of a community bank that works primarily with small and medium-sized businesses in Northern Nevada and northeastern California, I see the ripple effects of these macroeconomic trends playing out on the ground in every conversation I have with our clients, from farmers and ranchers to the owners of professional services firms. What I hear more than anything is a desire for stability and predictability.

The good news is that the last few months have shown that we may have finally turned the page on economic turmoil from the pandemic and reached a new normal for the economy. Coming into 2024, our unemployment rate in Reno-Sparks was just 3.9% and inflation has fallen precipitously from its peak. There are still many pitfalls on the road ahead, but there is finally reason to be optimistic.

How did we get here?

The federal government’s response to the severe drop in economic activity due to the pandemic was to inject billions of dollars into our economy. Our bank, like many others in the region, helped implement the Paycheck Protection Program, supporting thousands of local businesses and providing a backstop against catastrophic job losses across the entire economy. Additional direct spending through the American Rescue Plan Act and the Inflation Reduction Act drove bank deposit balances through the roof.

These federal funds, plus near-zero interest rates, led companies to grow through expansions as well as significant mergers and acquisitions. Northern Nevada saw 7 million feet of new industrial space built last year alone. Local mainstays like Port of Subs and countless others were gobbled up by national buyers; this included local legal, medical and professional services firms.

Inflation tamed

The result of this easily accessible capital was rampant inflation, reaching as high as 9%. To combat this, the Federal Reserve executed an aggressive set of rate hikes over the course of 2022 and 2023. The effect has been incredibly successful. Inflation hasn’t yet reached the Fed’s 2% target; however, it ended 2023 below 4%. Based on the outcome of the most recent Federal Open Markets Committee meeting, we can expect interest rates to be fairly stable over the course of the next year, allowing businesses to plan with more confidence.

A thousand businesses bloom

With the monetary landscape likely to remain stable, I expect that we will see a strong uptick in new business formation and the evolution of existing businesses through generational ownership transfers or sales. The baby boomer generation of business owners are looking to exit their businesses and retire. This presents huge opportunities for business growth as new owners take the helm. It’s also crucial for those business owners to be intentional about their succession planning and securing their own financial futures.

Beyond that, it’s likely that tighter monetary conditions will force some businesses that overexpanded to shed employees, leading to a new generation of individuals primed to start their own businesses. We’ve already seen this cycle playing out in the tech sector. Some of today’s most successful companies were started following the tech bubble bursting 20 years ago.

According to a PNC Bank survey in late 2023, 77% of small and mid-sized business owners were optimistic about their business. Programs like EDAWN’s Startup Reno will continue to support those entrepreneurs in our region.

The year 2024 has the potential to be a year of hard-earned economic stability where we can collectively catch our breath and acclimate to a new normal. While we have contentious elections ahead and continued geopolitical disruptions, for the first time in years, the macroeconomic conditions appear relatively predictable and calm. This year is also an opportunity for savvy business owners and public policy makers to make choices that will reap huge rewards in the future if they have the daring to think big and act boldly.

(This opinion editorial was originally published in the Reno Gazette-Journal on Feb. 27, 2024.)