Vegas economy should stay strong in short term

Kevin Ferguson

Thursday, July 26, 2001 | 11:05 a.m.

The national economy may remain weak for another 18 months, potentially causing a sputtering economy for Southern Nevada, UNLV's Business & Economic Research Center director said Wednesday.

But the local economy in the short run should continue to grow at a rate above the national average spurred by "catch up" construction, center Director Keith Schwer said.

He said that with no $1 billion megaresorts under construction, schools, houses and highways are examples of "catch up" construction.

"If the national economy shows a lackluster performance for an extended period of time, we will be affected and (the local economy) will follow the national economy (downward)," Schwer said.

After 10 years of issuing an annual economic outlook in December, Wednesday was the first time Schwer's department issued a "midyear" report. Schwer and Associate Director Mary Riddel issued the report at the UNLV International Gaming Institute.

Schwer said the issuing of a semi-annual report was because the local and national economies are in periods of rapid change, and "this type of assessment is particularly useful."

Some of the changing indicators include poor corporate earnings leading to job cuts in many sectors and a rising unemployment rate. Nationally, that rate has gone from its trough of below 4 percent in mid-2000 to 4.5 percent in June.

In Southern Nevada, the unemployment rate was 4.1 percent in May, compared to 3.6 percent in May 2000.

In the coming months, taxpayers are expected to receive tax rebate checks -- up to $300 for individuals and $600 for joint filers -- which is part of the Bush adminsitration's attempt to encourage more spending by consumers, thus kick-starting the sluggish economy.

"People can either put it in the bank, pay off debt, or spend it," Schwer said. "If it's not going to be spent, it won't be a big stimulus to our economy," Schwer said.

Gaming revenue, a key economic indicator for Southern Nevada, is growing at a lackluster annual rate of less than 1 percent but that growth rate is expected to increase as visitor volume improves, Schwer said.

Schwer said gaming revenue is a better economic indicator than visitor volume because a certain percentage of people who fly into McCarran International Airport do so only to connect to another destination.

With visitor volume growing by 1.5 percent in 2001, the center's forecasters project that gaming revenue will finish the year with a growth rate of 2.5 percent. That's down half a percentage point from a December prediction of 3 percent, Schwer said.

Schwer said his research group forecasts visitor volume to be flat over the next 18 months to two years.

Even though Southern Nevada's economy is so reliant on a single industry, gaming-tourism, the local economy is in a stronger position against an economic downturn than some high-tech meccas, like San Francisco and Austin, Texas.

"We've learned that high-tech has a tremendous downturn and (the industry) can be cyclical," Schwer said. "California prospered with a high growth rate, but suffered a huge downturn."

In contrast, he said Southern Nevada's economy has seen steady, but slower growth.

The hotel-tourism industry accounts for a third of the jobs in Southern Nevada, and another third of the jobs are indirectly related, he said. Examples of employers indirectly related to the tourism industry include schools and shopping malls patronized by hotel employees and their family members.