It's part of the euphemism treadmill. S. M. Stirling's Nantucket trilogy is about the results of hurling the island with its inhabitants from 1999 back to the Bronze Age. As the islanders return to the sea-trading style of their ancestors and build oceangoing ships for trade, the word locals is adopted for the natives of the era because it seems less condescending than natives. But by the second book, an Akkadian prince comments on how the Nantukhtar use the word local, even to him, "as we might term a hill-tribe, or a band of the truffle-eating Aramaeans."

There does seem to be a hint of condescension, though it's hard to tell if it's intended or not.

Okay, I have to respectfully disagree on this one. Some years ago I went to a talk on Canton Rose (aka Famille Rose) ceramics at an antiques shop in a ritzy part of the county. The proprietress was astounded when a sweet young thing walked in with a big box of rare and choice examples. She said that she had admired them at a yard sale, and the woman looked her up and down and gave her the entire box. The antiques dealer gasped and said, "Where was this?" and the reply was "Local."

The word by itself? No.

The word coupled with other stylistic elements? Absolutely can be condescending.

But I'd never say that the mere use of the word had a sneer in it.

The Ridger makes a good point--so much depends on context and intonation--not to mention body language.

Similarly, I've always found the use of "Blacks" slightly offensive, but not "Black people."

Perhaps it's the construction itself that offends: a word that's usually an adjective describing a group of people ("local") is used in this case as a noun for that group of people ("locals"), a sort of part-of-speech synecdoche.

The offense may come from the reduction of that group of people to just one characteristic. That is, there's an implied prejudice in the idea that just that one characteristic defines them.

I think this slight offensiveness holds true for many groups that have been subjected to frequent prejudice: the handicapped, the blind, the deaf, the young, the old or elderly, females, etc. "Elderly people" or "Elderly Americans" simply sounds more respectful to me than "The elderly."

I don't think there's any offensiveness or condescension when labeling a group of people by their nationality though. Maybe nationality is a big enough characteristic that it's fine to reduce people to that, whereas skin color, physical ability, and gender are not.

Interesting....

"Locals" in and of itself is not offensive.

Virtually every time the New York Times comes into a "local" community, their feature reporter (Oh, sorry, "writer") runs the risk of proving that (s)he is a snot.