Economist: Now might be ‘most difficult part of this recession’

By Buck Wargo

Friday, Feb. 13, 2009 | 2 a.m.

The recession in Las Vegas shows no signs of slowing and the prospect for selling a new home is dim, according to a UNLV economist.

The Center for Business and Economic Research released its Southern Nevada Index of Leading Economic Indicators for January that showed a decline in the 10 categories it monitors. Eight recorded double-digit percentage drops compared with January 2008 — the biggest one-month decline since the aftermath of 9/11, said Keith Schwer, the center’s director.

The fourth quarter of 2008 and first quarter of 2009 are likely to be the weakest performances of the economy, he said.

If the recession extends to midyear it will be the longest since the 1930s, Schwer said. He added he expects it to match the job losses of the most severe downturns after World War II, including those of the 1970s and 1980s that resulted in double-digit unemployment rates.

“It is highly likely that we may see a few more months of difficulty before things get better,” Schwer said. “It may well be that we are amid the most difficult part of this recession. This may be the hardest part right now.”

The timetable of any recovery depends on what happens to the financial institutions and the stimulus package working its way through Congress, Schwer said. Although he says he still sees some recovery by the end of the year, there are still a lot of unknowns that make it difficult to predict when it will occur.

The January index, which tracks data through November, is a forecast through May 1. The reason for the decline is evident:

Taxable sales fell 11 percent; gaming revenue fell 15 percent; visitor volume fell nearly 10 percent; convention attendance was down 16 percent.

Some of the biggest drops were permits issued for residential and commercial building with values dropping 92 percent and 60 percent, respectively.

The 296 residential permits issued in November were a 67 percent drop from October and an 88 percent drop from November 2007. That pushed down the center’s construction index to its lowest level since 1995, and projects a dim forecast for housing, Schwer said.

“With a large surplus of empty housing units and falling job numbers, prospects for selling new homes remain dim,” said Schwer, who added that will cause even fewer building permits to be requested.

The level of permits for residential building hasn’t been this low since December 1981. And commercial projects are also hitting lows, resulting in 11,000 fewer construction jobs in the past year. “Without a shift in prospects for growth, less construction will be needed,” Schwer said.

The business activity index fell 6 percent in November compared with November 2007. October and November had the largest declines of any months during the recession, Schwer said.

The November tourism index was 14 percent below November 2007, Schwer said. The reason is that “putting heads in the beds” has come at the expense of the bottom line.

Gaming revenue has fallen to its lowest level since July 2004, Schwer said.