Las Vegas economy likely to stay strong

Kevin Rademacher

Monday, June 27, 2005 | 11:08 a.m.

In December economic experts predicted that Southern Nevada's torrid pace of expansion would slow in 2005.

This morning, however, UNLV economist Keith Schwer said that while the pace is easing from a record year in 2004, Las Vegas continues to perform at a better-than-expected rate in many major categories.

"We are still doing quite well," said Schwer, director of the Center for Business and Economic Research and author of the Midyear Economic Outlook 2005.

Based on the region's performance so far this year, Schwer is now expecting 2005 employment levels to increase by 8 percent over 2004 to 876,699. The midyear forecast also predicts Southern Nevada's population to hit 1.83 million by year's end, up 4.5 percent from 2004. Gaming revenue also is expected to surge 6 percent from last year to $9.23 billion.

Schwer also pointed out that the optimistic projections for Southern Nevada come amid a "soft-growth period" nationally as oil and housing prices weigh on consumers.

While the rate of increase might be down from 2004, Schwer said Southern Nevada still manages to pace the nation.

"At this rate, you're still going to win," he said. "It's just a question of how fast you're going to go."

Such national concerns played out locally in modest increases in tourist traffic, the outlook said.

The report showed that first-quarter visitor volume was up a "modest" 1.4 percent from the same 2004 period and that April increases were no better.

"To be sure, this low growth may be attributable, at least in part, to higher gasoline prices affecting both air and highway travel," the report said.

Schwer also said that the low numbers could be blamed on some visitors postponing trips until after the opening of Wynn Las Vegas. He also pointed out that while visitor volume is weak, gaming revenue is growing at a record pace, suggesting that "visitors are spending more per capita in Las Vegas."

One expected decrease this year for Southern Nevada is an expected 10.8 percent drop in housing permits to 32,507 in 2005. That's off the record pace of nearly 37,000 permits in 2004. Schwer, however, has cautioned that the drop is merely a return to normal levels following an unusually robust year. He also predicts permits to rise again in 2006 to about 34,000.

Another concern highlighted by the report is an overall cost of living index score for Las Vegas at 112.7 in the fourth quarter of 2004. The housing cost of living was 122.5 for the same period. The national average for both indexes is 100. Phoenix, a chief competitor for economic development efforts, was below the national average in both indexes.

While Schwer said that the local economic gains would rule out any immediate threat of a bursting housing market bubble, he said it does pose long-term questions.

"No doubt, affordability is a concern for us," he said. "Housing affordability will make (economic) diversification more difficult."