the economy:

Vegas economy shows glimmer of hope

Steve Marcus / File photo

The downturn in the real estate market has lowered home prices, such as in this Henderson neighborhood, to levels not seen in years. Lower prices have increased home sales, a factor leaving some economists optimistic that a rebound in the economy is around the corner.

By Brian Wargo (contact), In Business reporter

Fri, Jun 12, 2009 (2:05 a.m.)

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Economist sees Las Vegas rebound slower than rest of U.S. (5-8-2009)
Professor says recession will last through end of this year (4-13-2009)
Expert: Index points to lingering recession in Las Vegas (4-10-2009)

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UNLV Center for Business and Economic Research - economic conditions

Could the worst be over for Southern Nevada’s economy?

Although the evidence is meager, there is an indication that Las Vegas’ economy could improve in the coming months based on the latest data from UNLV’s Center for Business and Economic Research, according to Director Keith Schwer.

The Southern Nevada Index of Leading Economic Indicators shows seven of the 10 categories turned positive in May compared with April. However, nine indicators were down compared with May 2008. Overall, the index was down by 3.2 percent since then.

The index, using data from March on such things as gaming revenue, visitor volume, retail sales and construction, is a forecast of the economy through Sept. 1. Schwer said the numbers suggest this is the end of the sharp declines. The debate, however, is over how sustainable any recovery will be, he said.

“Nevada’s worst recession since the 1930s is not over, but perhaps it is coming to an end,” Schwer said. “The index should have a clearly defined bottom and turn up for one to have some assurances that things are on the road to recovery.”

Schwer’s comments about the local economy mirror what most economists and Federal Reserve Chairman Ben Bernanke are saying about the national economy: The recession could be over by this year’s fourth quarter or the first quarter of 2010. Some have suggested that even though the problems are not over, especially when it comes to home foreclosures and unemployment, the worst appears to be in the past.

The best gauge for Las Vegas’ rebound will be the national economy because Southern Nevada depends on the rest of the country for tourists.

That gauge has been mixed so far with consumer confidence at its highest level since September, but consumers have cut back on spending for two consecutive months and are not expected to open their wallets more until the economy improves. And the nation’s unemployment rate is expected to increase through 2010’s second quarter.

Las Vegas economist John Restrepo, principal of Restrepo Consulting, said there is some hope for the nation’s economy. The Institute for Supply Management says U.S. manufacturing activity is shrinking at a slower pace and new orders placed with factories rose in May for the first time since November 2007, one month before the recession started.

“One month does not make a trend, but the decline seems to have moderated a bit,” Restrepo said.

Some economists such as Mark Zandi, chief economist for Moody’s economy.com, predicted last month at the International Council of Shopping Centers convention that Las Vegas’ recovery would lag the nation’s improvement. He had a dour outlook on the region through 2010 because people across the country have little to spend on vacations to Las Vegas.

Chris Thornberg, an economist with Los Angeles-based Beacon Economics, said the nation’s savings rate is only 5.5 percent and needs to reach 8 percent before people are in position to make major purchases again.

“It is not a function of ‘if’ but a function of ‘when,’ ” Thornberg said of Las Vegas’ recovery. “That is the glimmer of hope, but it isn’t going to be a speedy recovery. We are pretty close to the bottom, but we will not see any signs of growth until the second half of 2010.”

Las Vegas is like other Sunbelt states such as California and Arizona that rely on development for economic growth, Thornberg said. The recession is going to hamper the construction industry for two to three years.

The most recent Clark County Construction Index put out by UNLV is down nearly 30 percent compared with a year ago. More than 13,000 construction jobs are gone, continuing the contraction that started with residential and now comes more often from resort and commercial projects, Schwer said.

“The demand has to catch up to the supply, and that is going to be a few years (away),” Thornberg said. “It is a deeper cycle in Las Vegas because of these forces.”

Casino executives, meanwhile, are optimistic about the local economy’s recovery. UNLV’s Clark County Tourism Index turned up in March compared with February, breaking a five-month string of double-digit declines when measured against the same months a year earlier. March’s visitor volume was the highest since August.

In a conference call in May, Wynn Resorts Chairman and CEO Steve Wynn said that despite weaker quarterly results, he was “cautiously optimistic that we have seen the bottom” of the tanking economy.

Wynn based his optimism on booking windows that have expanded since the middle of last year. He also said there have been indications of a return to more traditional consumer behavior.

“I’m still going to be a little reticent,” Wynn said. “I don’t know whether the stimulus package has taken effect or whether it is effective.”

MGM Mirage Chairman and CEO Jim Murren has sounded an optimistic note about a 97 percent occupancy rate in April.

“It’s still tough, but it was brutal at the early part of the year,” Murren said in a conference call last month. “I don’t want to give false hope or expectations, but we think the worst of it is behind us.”

Restrepo is among those who think Las Vegas will lag the nation’s recovery because of the housing bust that made Southern Nevada’s recession deeper than elsewhere. He said he’s more pessimistic than other people because he thinks a recovery won’t take place locally until late 2010 or early 2011 compared with late 2009 or early 2010 for the rest of the nation.

Commercial foreclosures have yet to hit and their effect is unknown, Restrepo said. Another wave of housing foreclosures is expected this year, and the region has one of the highest credit card delinquency rates, he said.

Restrepo said the recovery will be measured by six months of job growth and six months of stable or increasing home prices.

Nevada’s unemployment rate reached 10.4 percent in April. Job growth, however, is a lagging indicator because even when the economy improves, companies are hesitant to rehire until they think the recovery is sustained, he said.

“The big question is — even with a national recovery by the end of this year — what spending habits will people have?” Restrepo said. “If they go on vacation, how much will they spend? My gut feeling is they will be more conservative in their spending.”

Brian Gordon, a principal at Applied Analysis, said all the indicators point to a continued decline in Las Vegas, but the pace is slowing.

Problems in the housing market remain a legitimate concern because people are losing equity in their homes and facing foreclosures because of job losses, Gordon said. The stability of the housing market will be important for any turnaround, he said.

Local consumer spending remains weak, he said.

“For a lot of consumers, they don’t know what the future holds, and they are hunkering down and operating much more cautiously like a lot of Southern Nevada businesses,” Gordon said.

In Business Las Vegas reporter Richard N. Velotta contributed to this story.

Discussion: 17 comments so far…

By Guy Demarco (Staff)

6/12/09 at 6:57 a.m.

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Hey all. This week on In Business Las Vegas, we look at one aspect of the valley's economic recovery: the housing market. We'll get the perspective of Greater Las Vegas Association of Realtors board member Forrest Barbee. That's this week on Cox Cable Channel 19.
By stevem

6/12/09 at 7:54 a.m.

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as i have posted on here numerous times, the only statistic that matters is the number of visitors to las vegas.

as long as that is down, we are still in a recession.

when we have a year over year increase in visitors for 3 months, then we can say the worst might be over.

folks, just go to google and click on "search news" and just type in the word "layoffs" and you will see that each day hundreds of americans are still losing their jobs.
By jaesun

6/12/09 at 8:48 a.m.

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here they go jumping to conclusions
By davidwayneosedach

6/12/09 at 9:16 a.m.

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Don't forget gasoloine prices. Here in southern California we are looking at $3.00/gal at the pump. This is roughly a dollar more per gallon than a month ago and makes driving to Las Vegas a lot more expensive.
By neiman1

6/12/09 at 9:20 a.m.

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Gas prices rising. Private employers still laying off while government employment rises. California about to take $24 Billion out it's economy to balance their budget. Airlines (AA this week) cutting flights nationwide. Hotel occupancy in San Diego at 60% and the W in foreclosure.

Sounds like the economy in Las Vegas is getting better every day.
By Sabibaby

6/12/09 at 12:09 p.m.

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Green Shoot's EVERYWHERE!!!

This is a great rant -> http://www.youtube.com/watch?v=KWu-efNN8...

if that doesn't work try youtube and search for wlstreetpro2.
By homer

6/12/09 at 12:18 p.m.

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Listen to neiman he has not been right about one thing ever. He just is a wealth of stupidity. Tune in tomorrow and he will regurgitate the talking points of Fox(fake) News and his hero Rush, other than that you can catch him riding his skateboard near you.
By tbvegas

6/12/09 at 12:31 p.m.

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My home is in escrow now, I need everyone to believe we are all ok for 30 more days!
By LasVegas2009

6/12/09 at 12:35 p.m.

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This is what they call a false bottom. We are in a downward spiral and it will continue. Sales Tax will now be 8.1% as of July first. This along with the increased tax on business will cause even more lay-offs and business closures. The back log of foreclosed homes will keep the housing sector low. The bankruptcy of Strip Properties will continue to add to the unemployment roles and keep other investment from entering market. We are no where near the end of this mess. We may not even be in the middle yet. We only need to look at our neighbor California to see that even the increase in taxes will not stop the the over spending of our government. We need large drastic budget cuts across the board. This state only needs to spend money it has collected and stop spending future tax dollars on social programs and salary expenditures. Balance the budget just like each and everyone of us do in our homes every month. We will continue to have budget shortfalls as the state continues to stifle business and drive owners out of business. Most everyone agrees that we need a diverse economy in order to move forward. Well business is not going to invest in a state that continues to burden that same business with new taxes. More business means more jobs which in turn moves more money around creating more tax dollars. Increasing the tax burden on business kills jobs and closes businesses.
By fremmasmind

6/13/09 at 4:04 a.m.

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Hah, Homer and his endless ranting. I think Neiman made some good points.
I'll believe things are "starting" to get better when the illegals are leaving our city and see our citizens getting back to work. There is no reason our government should be letting undocumented aliens to have jobs while our citizens are standing in breadlines. They act like they have no idea what's going on. Oh, I'm sorry. I forgot Dirty Harry was our senator. Keep pressing for the "Dream Act" Harry, the unemployed citizens of Nevada don't need you. We know you're too busy finding ways to give thousands of illegal immigrants a pathway to citizenship. Harry another P.P., Pathetic Politition.
By Linda_in_Vegas

6/13/09 at 8:53 a.m.

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Re: LasVegas2009

"Sales Tax will now be 8.1% as of July first. This along with the increased tax on business will cause even more lay-offs and business closures. "

Not only will sales tax be raised to 8.1%, but we are now paying a Nevada State Tax. I've noticed that on my last few grocery bills...
By MicheleR58

6/13/09 at 11:44 a.m.

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neiman1 is right and so is LasVegas2009.
Do get rid of the illegals though. While you're at it, get rid of Reid, Pelosi, Biden and of course, Obama.

We will not get better as long as they are in office ruining this country which they seem so bent on doing.

We will see "Change" when employers start hiring again. When kids ready for college are able to go. When those who had to drop out of college are able to go back.

When we see gas prices lowered, food prices lowered,etc.

That's when we will see "Change we can believe in."
By its2hot

6/13/09 at 1:47 p.m.

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Vegas economy sucks and it will not get any better for years to come. Wake up and smell the roses Brian, you don't have clue about this economy. The foreclosures have just begun and the commercial market is about to have a major collapse.

Under Obama and his group of buffoons we're becoming a nation of welfare. The trying to take our money and give to the tokens that support the freebies they're receiving under the socialists policies these buffoons are cramming down our throat.

Nevada is being sold to foreigners and HUD. You bet we're recovering, section 8 and Arabs!
By Babyboomer

6/13/09 at 4:08 p.m.

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Just pray the Arabs and everyone else don't pull their funds out of our economy.....we'll sink for sure....By the way, outside investors in our economy has been going on for so many many years, it scares me.We need to assure WE support our economy....buy AMERICAN...it's that simple.But it won't be easy.Near everything is farmed out of this country.

'
By markp

6/15/09 at 10:55 a.m.

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maybe there is a glimmer of hope in his fantasy world, which the picture clearly portrays the model of....

it will be many years before any glimmers appear because of the fact housing is not yet affordable and there are very few people who can borrow money to buy...
By miketeoh

6/15/09 at 5:12 p.m.

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What puzzles me is the way data are being generated. From this latest UNLV index, we see positive numbers on gaming revenue, tourists flow and new house permits.

Only 1 week ago, we read headlines of 6/5/09.
http://www.lasvegassun.com/news/2009/jun...
In this report, all are gloom and doom.

Which data is for us to believe ?
By roberti_feldman

6/27/09 at 9:29 a.m.

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Recent job loss in Vegas required support with Career services. I contacted Vegas Career Connection for assistance, and they really helped me with Career planning. They offer Outplacement Services for Employers wanting to service their exiting employees with caring dignity, and allow employees to focus on the future wthout having to pay for career placement services. I recommend their services.