Reports show signs of recovery slow to unfold

By Steve Green

Wednesday, March 31, 2010 | 1:07 p.m.

Southern Nevada and the nation remain mired in a slow and plodding economic recovery.

That’s the bottom line as related in the latest crop of economic reports:

• Unemployment in Nevada in February reached a record of 13.2 percent, up from 13 percent in January and 10.1 percent in February 2009. With more people seeking work, the unemployment rate increased even as Nevada employers created 10,400 jobs during the month, the first increase since October.

• January’s visitor volume was up 4 percent to 2.88 million from the previous January, but Las Vegas hotel occupancy dipped nearly 1 percentage point to 71.1 percent. Occupancy fell because of a 5.8 percent increase in the city’s hotel-room supply, to about 149,000 rooms, largely because of CityCenter’s opening.

• Las Vegas-area existing-home prices in February averaged $135,694, up 0.6 percent from $134,925 in January, but down 12.8 percent from February 2009. Home prices are down a staggering 55.8 percent from their August 2006 peak.

• California, the largest feeder market for Las Vegas resorts, is dealing with double-digit unemployment and will likely see little or no economic growth for the rest of the year.

• Consumer confidence nationwide improved, but remained low in March and was essentially unchanged from a year ago. This is a key indicator for Nevada because consumer interest in visiting Las Vegas depends on consumers having more confidence in their economic futures.

The Conference Board’s nationwide confidence index rose to 52.5, exceeding the median forecast of economists surveyed by Bloomberg News, from 46.4 in February, according to figures issued Tuesday by the New York research group.

Even though consumer confidence rebounded in March after a sharp decline in February, “consumers continue to express concern about current business and labor market conditions,” said Lynn Franco, director of the Conference Board Consumer Research Center. With consumer confidence levels generally unchanged since spring, consumers remain pessimistic for the next six months, she said.

James O’Sullivan, chief economist at MF Global Ltd. in New York, gave a slightly more optimistic assessment: “With signs of improvement in the labor market, confidence is more likely to be up than down in the next few months. It’s still a low level of confidence,” he told Bloomberg.

In Nevada, the increase in employment in February was a weak sign of life for the economy, state labor economist Bill Anderson said.

“The economic environment changed little in February and Nevada’s labor markets continue to bounce along the bottom of the business cycle,” said Anderson, chief economist for the Nevada Employment, Training and Rehabilitation Department.

Las Vegas economic analyst John Restrepo added in his latest Economic Insight report: “The ongoing consensus is that the United States will see a slow and plodding recovery, because of the very weak labor market and consumer spending (especially discretionary spending). This in turn will cause Nevada’s recovery to lag the nation’s recovery.

“While we hope that the growing signs of a national recovery will filter down to Southern Nevada in 2010, it doesn’t appear likely at this time, at least regarding job creation. Again, with a regional economy that depends heavily on discretionary spending at the national and international levels, the local recovery will lag. It is this dependence that is the source of our economy’s structural weakness.”

Restrepo, however, noted a couple of glimmers of hope for the Las Vegas area — albeit tempered by words of caution.

“There are growing signs that some of the Nevada and Southern Nevada indicators are starting to stabilize, at least is they relate to certain tourism statistics,” Restrepo wrote. “Gasoline prices in Las Vegas remain relatively low compared to the peak, but are on the rise. This concerns us, because of the coming travel season.”

According to AAA, the March 20 price of regular gas locally was $2.81 per gallon compared with $2.72 a month ago and $2.11 last year. The peak was recorded at $4.28 on June 21, 2008.

From December 2008 to December 2009, taxable retail sales statewide fell 6.6 percent to $3.7 billion — an improvement from the 17.8 percent decline recorded in October by the state Taxation Department. In Clark County, the annual decrease was 8.4 percent to $2.7 billion. “These drops were an improvement compared to the previous 14 months of double-digit decreases,” Restrepo wrote.

On Tuesday, the Taxation Department said January sales fell 8.3 percent to $2.1 billion in Clark County. There were some positive signs with business up for bars, restaurants and for sellers of clothing and furniture.

In California, UCLA’s first Anderson School of Management forecast for 2010 projected a “bipolar” recovery for the United States with slow growth in the national gross domestic product coupled with high unemployment until 2012.

UCLA Anderson Forecast senior economist David Shulman said Washington’s economic stimulus packages may have unintentionally caused “economic schizophrenia.”

Tax cuts and spending programs, coupled with a nonsustainable zero interest policy, spur growth, he said in the report. But businesses do not make long-term hiring decisions based on temporary government policies, he added.

“Nevertheless, the economy is now on a growth path and employment will soon be increasing, albeit modestly,” Shulman wrote.

As for California, UCLA Anderson economist Jerry Nickelsburg said that to see employment increase, the state needs to experience more demand for its farm products and goods produced by its factories.

The forecast calls for California employment in 2010 to climb, but not to 2009 levels. The state’s unemployment rate of 12.5 percent in February was up from 10.2 percent in February 2009.

“Once employment growth returns in 2011, employment will begin to grow faster than the workforce at a 2.3 percent rate and the unemployment rate will begin to fall. Real personal income growth is forecast to be 1.3 percent in 2010 and 3.7 percent and 4.5 percent in 2011 and 2012 respectively,” the UCLA forecast said. “The (California) unemployment rate — currently at 12.5 percent — will fall slowly through the balance of this year and should average 11.8 percent for 2010. Although the state’s economy will be growing, it won’t be generating enough jobs to push the unemployment rate below double-digits until 2012.”

The pattern of weak job growth in California and across the country confirms the outlook for a slow recovery for Nevada.

“The ramifications are not good for Nevada. The longer it takes for the national economy to rebound, the longer it will take for Nevada’s leisure and hospitality dependent economy to recover,” said Anderson, the Nevada economist.

“Leisure and hospitality makes up 27 percent of Nevada’s industry base, compared to just 10 percent nationally. Consumers are still in no mood to spend. Negative pressure on wage growth and disposable income growth will persist as long as the labor market remains soft. Workers are still uncertain about short-term prospects and are unlikely to spend on recreation and entertainment any time soon. It appears Nevada will be waiting for some time for its fortunes to improve,” Anderson said.