Economist foresees slowdown

Thursday, Oct. 16, 1997 | 11:20 a.m.

A lack of skilled laborers to fill the growing number of jobs in Southern Nevada and the area's transportation bottlenecks will cool off the state's economy in 1998, Wells Fargo Bank's senior economist predicts.

Gary Schlossberg, who addressed the Las Vegas Executives Association Wednesday morning and customers of Wells Fargo's Private Client Service Division in the afternoon, said a healthy national economy and California's continued recovery would lessen the blow for Las Vegas, which he predicted would have job growth of 5-6 percent next year.

Job growth is one of Southern Nevada's most reliable and up-to-date economic indicators. Hovering at between 6 percent and 8 percent this year, the state's job growth rate has been the best in the nation since the mid-'90s.

Schlossberg, who serves as the senior economist for Wells Capital Management in San Francisco, said California's recovery has had mitigating effects on Southern Nevada. The migration of Californians to the Silver State during the slump brought skilled laborers to the region. That has now slowed.

Meanwhile, the brighter California economy has boosted tourism, especially to Las Vegas' resorts, as newly confident residents spent money for weekend getaways.

Fewer skilled laborers and the area's inability to fix growth problems quickly are the only dark clouds on the region's horizon.

"Transportation and other infrastructural bottlenecks are the more immediate restraints on economic growth," said Schlossberg. "The longer term risk is the area's dependence on the cyclically sensitive gaming and entertainment industries."

Schlossberg's read on the national economy is equally conservative.

"The economic environment may turn partly cloudy during the next 12 months, as inflation edges higher and carries interest rates along with it," he said. "However, there's no recession on the horizon, despite the economy's weak spots and potential volatility in the financial markets."

The question economists keep asking themselves, Schlossberg said, is whether the nation's current growth cycle is different from those experienced in the past.

"The economy has done it all, enjoying an unusually long period of economic growth, near elimination of the budget deficit and one of the best stock-market performances on record," he said.

Through August, the Standard & Poor's 500, a measure of the stocks of the 500 largest publicly traded companies, posted the best three-year performance in 70 years -- an increase of 31.7 percent. On average, the S&P 500 gains about 11 percent in that time frame.

The stock market may encounter some "head winds," Schlossberg said, noting that rising interest rates and slower earnings growth will dampen, but not drown investors.

"Although inflation is expected to edge higher in the coming months," he said, "the forces of disinflation will be strong enough to keep the inflation rate at a historically low 2.5 percent to 3.5 percent."