UNLV economist foresees darker times

By Buck Wargo

Friday, Jan. 23, 2009 | 2 a.m.

It’s bad and getting worse.

That’s the description of the local economy from Keith Schwer, director of UNLV’s Center for Business and Economic Research.

Schwer released the center’s Southern Nevada Index of Leading Economic Indicators that shows a downward trend that suggests the economic contraction won’t abate during the first half of the year.

“To be sure, there are some people doing as well as they were a couple of years ago, and some people’s financial positions have improved. But most people have either lost jobs, have fewer hours or smaller tips,” Schwer said.

Any improvement in the local economy will eventually show up in the data, a change which Schwer said would become clear when statistics bottom out six months before that time. He has already predicted the state jobless rate will hit 10 percent this year, up from 8 percent in November.

The December index showed a 0.2 percent decline from November and 3.3 percent decline from December 2007. Much of the drop is attributed to gross gaming revenue in October falling 11.25 percent from September.

The index also dropped because of a decline in sales, down 3.63 percent, and steep declines in commercial and residential construction.

Schwer said he holds out hope the local economy could start to turn around by the end of the year or in the first quarter of 2010.

For now, the future depends on what happens in Washington with a proposed $800 billion-plus stimulus package. There is a proposal to decrease the withholding tax of workers and put more money in their paychecks to spend.

“Our future depends on what happens in Washington and when they are able to get the stimulus package out,” Schwer said. “We depend on people coming here and spending their money. If they don’t have jobs, they are not going to come here.”

Consumers, who make up 70 percent of the economy, aren’t able to fuel a recovery alone, Schwer said. Government spending on infrastructure, which would be part of any stimulus package, will help create jobs and infuse money into the economy.

Economist John Restrepo, principal of Restrepo Consulting, said it may be 18 months before the local economy improves. For that to happen the jobless rate needs to improve for six months and home prices must rise. Home prices are falling on a monthly basis.

“Those two indicators need to show consistent improvement to show we are heading off the recession,” Restrepo said.

The Clark County Business Activity Index continued to contract as it has steadily done so since October 2007. For the latest month available in October, the index fell 6.52 percent year-over-year and 1.7 percent from September. The reason is that gross gaming revenue fell in excess of 20 percent.

The Clark County Tourism Index fell 8.62 percent and was down 16.8 percent from October 2007.

The Clark County Construction Index rose 1.18 percent in October compared with September, but is down 24.6 percent from October 2007. More than 8,000 construction jobs have been lost in the past year.