The forecast came on the same day an economic analyst told another state panel that Nevada is in a recession and the outlook won't improve in the short term.

"The recession is already here, in our opinion," James Diffley, director of the U.S. Regional Services Group of Global Insight, told a the Economic Forum. "We have been arguing all year Nevada is in a recession."

The Economic Forum, made up of five private citizens, must tell Gov. Jim Gibbons by Dec. 1 how much money he can spend on the 2009-11 state budget. Thursday's meeting was the first for the panel to start preparing those projections.

If Nevada's unemployment reaches 8.6 percent in 2009, it would be the highest rate since 9.7 percent in 1983. The state's jobless rate in August was 7.1 percent, the highest in 23 years.

Bill Anderson, the state's chief economist, made the jobs predictions as he pointed out that Nevada two years ago had unemployment rates of just over 4.0 percent and led the nation in job creation.

Anderson and economist David Schmidt said the state economy has been sputtering because of the crash of the real estate market, the decline in home values and the reluctance of residents to spend what money they have.

Anderson said that in the past, employment jumped dramatically after the opening of each megaresort in Las Vegas, but this isn't happening anymore. The City Center project on the Strip is expected to employ 12,700 people when it opens in November 2009, but the state's jobless rate will increase even with this project, he said.

He said the state workforce will drop by 1.1 percent this year and increase by only 0.3 percent in 2009 and 1.8 percent in 2010. Nevada averaged job increases of 6 percent in 2004 and 2005.

Anderson made his predictions without considering the effects of Congress potentially approving the $700 billion economic bailout bill, which could occur today. He said it is too early to determine whether that bill will help or harm Nevada.

"Many of the problems in Nevada are external and beyond our control," he said, noting the $700 billion bailout is equivalent to 28 years of the gaming win in Nevada.

Global Insight's Diffley said the prognosis is that Nevada will start to see some economic recovery in mid-2009, with stronger growth in 2010.

"We do think the economy will be growing again by mid-2009," he said. "And the job market will slowly turn."

Diffley said the bailout package being considered by Congress is not intended to avert a recession, only lessen its impact.

Nevada's real estate sales market hasn't hit bottom yet, but that could occur in the fourth quarter of this year, he said.

But Diffley said "we can't see the bottom yet" on home prices.

The significance of the housing market collapse can be seen in the housing start numbers, he said. In 2006, there were 48,000 housing starts in Nevada. In the coming year, housing starts are projected to total 13,400. They are expected to recover to 21,700 by fiscal year 2011, he said.

In data provided to the Economic Forum, he said Nevada is projected to lose jobs both in fiscal year 2009 and 2010. Employment is not expected to grow until fiscal year 2011.

Dillfey is not the first economic expert to use the word recession in Nevada.

University of Nevada, Las Vegas economist Keith Schwer made a similar declaration for the Southern Nevada economy in June, based on four factors: employment, taxable sales, visitor volume and gaming revenue.

"I've seen nothing since to change my mind," he said in a telephone interview Thursday. "We've been in a recession for a year now."

Schwer said when a turnaround will occur is a moving target, given the ongoing developments nationally.

"But I don't really see anything turning around in Southern Nevada until the end of (calendar year) '09," he said. "We're looking to the openings on the Strip as a catalyst for a turnaround."

Despite the bleak unemployment rate news, the Employment Security Council, a group of six business leaders, unanimously recommended Thursday that the state's unemployment tax rate remain at 1.33 percent in 2009.

Their recommendation is expected to be approved by Jones next month.

Employers pay the entire tax, which goes into a trust fund to cover unemployment checks given to laid-off workers.

The 1.33 percent tax is the average rate. What each company pays depends on its experience in laying off workers. Rates vary from 0.25 percent to 5.4 percent.

The tax is paid on the first $26,600 of each employee's wages. Unemployment checks average just under $300 a week.

Because unemployment is expected to significantly increase, economists predict the unemployment trust fund balance to fall by $253 million in 2009, to $492 million. They said the trust fund should stand about $745 million on this Dec. 31.

While unemployment in 2008 has been much higher than last year, the state's trust fund balance has declined by only $58 million.

Jones said she would like to have a balance greater than $492 million at the end of 2009, but noted Nevada is still a lot better off than many states.

Four states -- Michigan, Missouri, New York and Ohio -- already have depleted their entire trust funds and 14 other states soon could become insolvent. Jones said California's trust fund soon will drop to zero.

States with no trust funds are required by law to secure federal loans so they can continue to pay laid-off workers.

Jones and the economists said the state tries to build up its trust fund during good economic times so that it will have a nest egg to cover checks for laid-off workers during bad times.

"We tend to store nuts away for winter, for good times," Jones said.

Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3901. Contact Capital Bureau reporter Sean Whaley at swhaley@reviewjournal.com or 775-687-3900.