Southern Nevada's economy will "muddle" through 2008 with modest growth in employment, population, visitors and gaming revenue, while the housing market continues to make adjustments and median home prices decline further, local economist Keith Schwer said Tuesday.
Schwer, director of the University of Nevada, Las Vegas' Center for Business and Economic Research, said he has great difficulty in predicting a recession, though he admitted that the possibility is greater nationally than locally.
His monthly Southern Nevada Index of Leading Economic Indicators keeps moving sideways, with a downturn in the residential market buoyed by $30 billion in Strip investment and 40,000 new hotel rooms coming online by 2009.
"I think Jimmy Stewart was right. I think it is a wonderful life," Schwer told more than 300 people attending his Economic Outlook 2008 at Las Vegas Convention Center. "And when the bell rings, we'll get another angel."
Schwer predicts 2.9 percent growth in 2008 visitor volume, 2.6 percent population growth, 2.1 percent employment growth and 1.6 percent gaming revenue growth. Housing permit units will drop nearly 22 percent, he said.
All of those percentages will increase in 2009, driven by a 15.8 percent increase in hotel rooms.
"We think hotel rooms are the anchor for future predictions," Schwer said. "We're going to have 175,000 hotel rooms. You don't understand the magnitude of 175,000 rooms. You could take the entire state of Wyoming, put them three to a room. We'd be able to feed them and they'd have extra towels."
Clark County's tourism index remains high, with hotel occupancy above 90 percent.
"That's phenomenal," he said.
Schwer said we're living in rapidly changing times, which presents greater risks to his forecast than usual.
"We see our major risks as housing and associated credit woes, missing opening dates for new properties, a national recession and unexpected events raising concern for safety in travel," he said.
Current economic indicators present a "mixed picture," Schwer said. His best guess for a national recession is about 50-50, keeping in mind that the classic definition of a recession is four consecutive quarters of negative gross domestic product growth. The media and public will use two quarters of declining GDP, he said.
Mike Majewski, economic development director for North Las Vegas, said Schwer is "extremely credible" with his numbers. From 1994 to 2007, the mean absolute percent error between Schwer's annual forecast and actual numbers was in the 1 percent to 3 percent range, except for housing units permitted, where he was off by 12.5 percent.
"He actually reinforces what I thought," Majewski said of Schwer's outlook. "We're still creating jobs, not just casino jobs, but every sector. We've got manufacturing jobs, more medical jobs with the V.A. and other hospitals, a lot more retail coming in, so I do see the economy still going strong, just not as strong as in the past."
The bright spot in travel for 2008 is the international market, Schwer said. A falling U.S. dollar makes Las Vegas more affordable.
"It's now cheaper for someone to come from Paris to Las Vegas to spend their money," he said.
Travel and tourism will have another good year, though growth rates will remain small, a reflection of room capacity constraints. Expansion in 2009 will trigger better growth opportunities.
Job and population growth will continue to weaken, largely a result of a weaker national economy.
"Most importantly, we do not forecast a recession, believing that weak performance is the more likely scenario," Schwer said.
Contact reporter Hubble Smith at hsmith@reviewjournal.com or (702) 383-0491.
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