Index shows ‘no clear signals’ that local recession is at end

By Buck Wargo

Friday, Aug. 7, 2009 | 3 a.m.

A UNLV index that predicts the economy’s performance over the next four months dipped in July after slight improvements in May and June.

The Southern Nevada Index of Leading Indicators fell 0.62 percent in July compared with June and was down 3.23 percent from July 2008, according to Keith Schwer, director of UNLV’s Center for Business and Economic Research.

Schwer said the decline in July essentially gives back the gains in the previous two months, meaning there is no indication of a recovery. The index, which measures the economy through Nov. 1, shows Las Vegas likely will have to wait until 2010 for any improvement.

Schwer said it’s not unusual for numbers to fluctuate when a bottom is being formed, but the good news is there is no longer a steep decline.

“We see continued weakness in the Southern Nevada economy with no clear signals that the local recession is at the end,” Schwer said. “At best, we no longer see a free fall of the index and perhaps forming a bottom to the decline.”

Six of the 10 indicators rose in July, which measures economic performance in May. But Schwer said there were actually only three when seasonal adjustments are included. That is because of normally greater activity in May than in April.

Taxable sales, which are the biggest chuck of the index, fell 1.95 percent.

But gross gaming revenue was up 1.76 percent and visitor volume was up 0.9 percent.

Convention attendance, however, fell 17.6 percent, and the number of passengers who flew in and out of McCarran International Airport fell 0.93 percent.

The Clark County Tourism Index was down 2.77 percent in May and 8.6 percent from May 2008, Schwer said. Las Vegas is hurt by fewer flights and people rearranging their budgets to increase savings, which leaves less money for discretionary spending.

“Without a recovery in the national economy, tourism will surely languish,” Schwer said.

The Clark County Business Activity Index shows a contracting economy, he said. The loss of jobs is pushing the economy downward, further depressing incomes and revenues, Schwer said.

The Business Activity Index fell 1.68 percent in May and is down 9.8 percent compared with May 2008.

One bright spot in the latest numbers is the Clark County Construction Index, which rose 0.64 percent. It is the second consecutive month the index was up, but it has quite a ways to go: It is down 33 percent compared with a year ago.

“It is hard to believe that a one-month improvement in the index is likely to hold in the months ahead, although some prospect for relief shows in federal construction projects under way,” Schwer said.

Residential construction permits rose 11.2 percent and their value was up 6.5 percent. Commercial building permits fell 13 percent, but their value was up 113 percent over the past year.

Construction is expected to remain weak because of the lack of demand.

Building owners are increasingly finding themselves underwater as property values and land prices contract, said Brian Gordon, principal at consulting firm Applied Analysis.

Developers and landlords are waiting for the Las Vegas commercial and industrial markets to hit bottom.

Industrial jobs have fallen by 20,000 in the past year, office jobs by 17,000 and retail jobs by 6,000.

Fewer people are moving to Las Vegas. The firm reported 13,900 driver’s licenses for those moving from out of state, down from 14,100 in the first quarter and 16,000 in 2008’s second quarter.

The number of new electrical connections is also down with 2,000 more electrical connections than disconnections in the second quarter of 2008. By this year’s second quarter of this year, there were 2,000 fewer electrical connections than disconnections.