Southern Nevada economy expected to rebound in second half of 2011

Las Vegas is still reeling from the deepest recession since the Great Depression and probably won't snap out of it until the second half of 2011, the director for UNLV's Center for Business and Economic Research said Wednesday.

The good news is that the worst appears to be behind us, Stephen Brown said at his first Southern Nevada Economic Outlook since taking the job earlier this year.

"Southern Nevada's economy, in our estimation, is at the bottom," the economist told about 500 business leaders who attended the presentation at M Resort. "We're not looking to find the bottom. We are at the bottom. If it's not the bottom, could things actually look worse? I think the answer is 'no.'"

Brown said the local economy will start to show growth in the second half of next year as long as the U.S. economic recovery continues. Recovery in the real estate market will follow later, he said.

The Southern Nevada Index of Leading Economic Indicators, compiled by the research center at University of Nevada, Las Vegas, has been relatively flat for the past six months and even back to June 2009, which the government declared as the official end of the recession.

It hasn't felt like that for most Las Vegans. The unemployment rate remains elevated, though it has receded from its peak of 15 percent. Few of the 60,000 construction workers who lost their jobs are likely to regain them as new construction projects have come to a virtual standstill.

The Clark County Tourism Index showed an upward swing this year with gains in visitor volume, gaming revenue and passengers arriving at McCarran International Airport. Retail sales actually picked up on the Strip, Brown said.

It's up to the dominant tourism and gaming industries to take the lead in helping Southern Nevada's economy rebound, Brown said. Crucial to their success is how well the national economy performs.

"A slowing of the U.S. economy would really be disastrous for us," Brown concluded. "However, if the light bulb comes on in the national economy, if we see more investment activity, we could see a pickup in our recovery."

Everyone talks about economic diversification, but that's not going to happen anytime soon, he said. Our best bet for recovery lies with gaming and tourism, he said.

Tourism spending rose in the United States for the first two quarters of the year, which means people in other parts of the country are going on vacation and perhaps coming to Las Vegas, Brown said.

Even though more people are visiting, they're spending less.

"Many casinos have to offer substantial discounts to get them in the rooms. If we get them in the rooms, we can get the rest of the money out of their wallet, which is true, but there's not as much money in their wallet as past years," Brown said.

Through October, visitor volume is up 2.8 percent from a year ago to 31.5 million and gaming revenue is up 1.7 percent to $7.46 billion, the Las Vegas Convention and Visitors Authority reported. McCarran passenger traffic is down 1.9 percent.

Long-term economic growth depends upon Las Vegas' economic base, which is gaming and tourism, Brown said. The real estate market by itself can't sustain an economic base indefinitely.

"There are thoughts about diversifying our economic base. If you could only have one industry for an economic base, tourism is the one you want," he said. "It's naturally diversified. People make their money in high-tech, they come and spend it in Las Vegas."

The economist is forecasting a 3.1 percent increase in visitor volume for 2011; 1.7 percent increase in gaming revenue; 0.4 percent population growth; 0.4 percent employment growth; 2.6 percent increase in personal income; and 2.6 percent decrease in housing permits.

Brown said the risks to his economic forecast are slowing of the U.S. economic recovery; slowing of California's economic recovery; problems resurfacing in the mortgage industry; and energy price hikes that would slow gains in tourism.

Among the economists' findings:

■ Employment growth is not expected during the first four to six months of 2011.

■ Visitor volume and gaming revenue will both rise, but gaming revenue will rise at a slower rate because visitors are budget-conscious.

■ Conventions are bringing in the most visitors as discretionary spending remains low and visitors as much of the local tourism industry relies upon California, also experiencing slow economic growth.

■ Population growth will be moderate.

Population rose dramatically in Southern Nevada from 1985-2005, then started to level off at close to 2 million, though out-of-state driver's licenses turned into the Department of Motor Vehicles are starting to increase again.

"If you're in Oregon, you'd be thankful those Californians aren't coming in," Brown said. "But we're not Oregon. We like Californians."

California's economy is the "big monster" next to us and while people have written it off in the past, it's always managed to come back from the dead, Brown said.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.

Southern Nevada Forecast

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Comments

Note: Comments made by reporters and editors of the Las Vegas Review-Journal are presented with a yellow background.

1. alwaysright Dec. 17, 2010 | 2:09 a.m. Report Abuse

   I hope it rebounds because I don't want to have to take Furloughs like some people have to in this state.

2. vegasbigfoot Dec. 16, 2010 | 11:13 p.m. Report Abuse

   Solar energy will be here someday. But, like the electric car, it isn’t here yet. It’s just not cost beneficial, Someday, sure. But, not yet. Don’t you people understand?
   
   And, the rebound of Las Vegas? Also, not yet. The country is in the midst of a depression. Understand? Las Vegas lives off people spending discretionary income on vacationing. They must be somewhat satisfied with their finances to spend on vacations. How long do you think it will take for the rest of the world to feel comfortable with their finances again after the depression ends? If the depression ends in a year, and, it takes people 3 years to rebuild their financial confidence, that’s four more years before Las Vegas starts actually improving. These so-called experts need to face reality..

3. vegasbigfoot Dec. 16, 2010 | 11:12 p.m. Report Abuse

   Solar energy will be here someday. But, like the electric car, it isn’t here yet. It’s just not cost beneficial, Someday, sure. But, not yet. Don’t you people understand?
   
   And, the rebound of Las Vegas? Also, not yet. The country is in the midst of a depression. Understand? Las Vegas lives off people spending discretionary income on vacationing. They must be somewhat satisfied with their finances to spend on vacations. How long do you think it will take for the rest of the world to feel comfortable with their finances again after the depression ends? If the depression ends in a year, and, it takes people 3 years to rebuild their financial confidence, that’s four more years before Las Vegas starts actually improving. These so-called experts need to face reality. . .

4. Wallbanger Dec. 16, 2010 | 10:55 p.m. Report Abuse

   No charge Jack!! Just open your eyes and ears and pay attention!!

5. Arkitect Dec. 16, 2010 | 9:06 p.m. Report Abuse

   Hubble, Brown is leaving something out...how? Exactly HOW are his projections going to come to fruition? Is solar energy coming to town? The Sun is already here & patiently waiting up there in the sky. Reliable guy, too. * * * And this is a gambling town, right, Hubble? * * * Did Brown offer to return everything that he will be paid in 2011, if he is wrong? * * * You can give us his answer in your next interview with him, okay?

6. JDubs in Miami Dec. 16, 2010 | 8:42 p.m. Report Abuse

   uhh, yeah... rose-colored glasses were never in fashion. Vegas was in the toilet and now is in the sewer because of Harry's re-election. As long as the Strip has Harry Reid's name all over it, forget about recovery. I'm glad I moved out.

7. Thomas.Atwood Dec. 16, 2010 | 8:19 p.m. Report Abuse

   (everybody now) Let the SUN shine.............. Let the SUN shine in........... The SUN shine in..............

8. Thomas.Atwood Dec. 16, 2010 | 8:09 p.m. Report Abuse

   Neither our fearless forecaster nor anyone in the Comments section even bothered to mention Nevada's number ONE resource. I'll give you a hint -- just take a walk outdoors and look above you on one of our glorious SUNNY days. In another ten years, solar collectors from here to Californy will produce bountiful electricity to power our neon lights and sell the surplus to an energy thirsty nation. Young people fresh out of trade schools will contribute to our economy with high paying green technicians jobs at solar and wind power plants. Retired baby boomers from across the country will flock to our wonderful climate, taking advantage of great deals in real estate. Ahhhhh, what a beautiful day!

9. Slam Dunk Dec. 16, 2010 | 7:58 p.m. Report Abuse

   Judas, Good Luck getting down that sportsbet at Blackhawk, Phoenix, and Foxwoods. One hundred dollar bet on a football game, wow. Can you say, "rookie". Its one hundred and ten to win a hundred, even my grandma knows that.

10. TONY Dec. 16, 2010 | 7:13 p.m. Report Abuse

    MR BROWN NEEDS TO TAKE OFF THE ROSE TINTED SPECS AND SEE THE WORLD FOR ITS PRESENT CONDITION.....................EU ETC

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