Economist predicts bright future to continue locally

Wednesday, Oct. 8, 1997 | 10:35 a.m.

The United States has been in economic expansion for so long many people don't know the meaning of a downturn.

For those who have never been there, John Mitchell, chief economist for U.S. Bank, has some good news -- things aren't going to change much in the months ahead.

Mitchell addressed Southern Nevada customers of U.S. Bank Tuesday in an annual review of economic trends and predictions for the future.

The U.S. economy has been in expansion since March 1991 and at October's end will tie the third-longest growth period ever recorded. That was an 80-month span that began in June 1938 that was boosted by the manufacturing necessitated by World War II.

The second-longest period, 92 consecutive months, began in November 1982, lasting into 1990.

"Many Americans have never known an economic downturn," Mitchell said in his chart-filled address to about 100 at the Rio hotel-casino.

And, it appears there's no immediate end in sight. Mitchell predicts that although the growth won't be as frenetic as it has been, there still will be growth for Southern Nevada, thanks in part to a healthy national economy.

The reasons for the bright national outlook:

* A stable monetary policy. Mitchell said the actions of Fed Chairman Alan Greenspan and his predecessor, Paul Volcker, and the board of governors have kept a clamp on inflation. Since 1992, the inflation rate has hovered at around 3 percent.

* Changes in behavior. In periods of low inflation cycles, industries explore new ways to keep costs down and boost productivity.

* Insecurity. Although consumer confidence is high, job security is not. The reason: When industries look at new ways to keep costs down, some of those include downsizing the workplace. Still, the unemployment rate has maintained a low level.

* Deregulation. Several industries have been deregulated in the last decade, allowing them to explore commerce in areas that had been closed off by the government.

* Lower oil prices. While the price of oil has jumped in recent months, it's considerably more stable than it was in the '70s.

* A strong dollar. The U.S. dollar is strong overseas, Mitchell said, driving down the cost of imports. Recently, trade has improved with Mexico, Canada and Western Europe, offsetting the doldrums being experienced in Japan.

* Improvements in medical care. The move toward managed care is helping to hold down inflation in a category that traditionally has climbed more rapidly than the rest of the economy.

On the national front, Mitchell forecasts interest rates to remain stable through 1998, although he said he wouldn't be surprised if the Fed made a move next month to increase the three-month Treasury rate to 5.75 percent.

Stable interest rates would be good news for the Southern Nevada economy, where homebuilding and the construction industry are key influences on the big picture, Mitchell said.

Residential building permits have climbed steadily in Clark County since 1992, and in 1996 one in four jobs in Southern Nevada was in the construction sector.

That should taper off, Mitchell said, but not go into decline, especially with a new wave of megaresorts due to open.

Mitchell said the favorable national outlook, including a rebound in California, should spell good fortunes for Southern Nevada through the rest of the year and 1998. His forecast: 6 percent growth in the local economy.

He added that local officials are addressing some of the problem areas that could put a damper on expansion. For example, a growth boundary -- the so-called "ring around the Valley" -- has been one of a number of proposals to handle infrastructure problems.

Other growing communities also are wrestling with development boundaries, he said, including Boise, Idaho, and Salt Lake City. Portland, Ore., and Seattle already have growth boundaries in effect.

Meanwhile, the number of gates at McCarran International Airport is being expanded and when complete could accommodate more tourists to fill the glut of new hotel rooms. Mitchell also applauded efforts to increase the number of conventions meeting in Las Vegas to help fill hotel rooms.