The Las Vegas economy, weakened by more than three years of recession, has entered a new phase in its recovery with some indicators showing modest improvement, according to the chief economist of City National Bank.
The economist, Perry Wong, told an audience of 100 bankers and business executives gathered Wednesday for the bank’s Midyear Economic and Market Update that the worst of the downturn and any possible threat of a double-dip recession are behind us.
“We are turning a corner. Looking ahead, we have some growth,” he said.
Wong doesn’t expect robust growth to return to Las Vegas or Nevada until 2013. But he did point to several indicators trending upward since the depth of the recession in 2008 and 2009.
Wong said he expects a 3.1 percent increase in employment this year in the region’s hospitality and leisure industries. That growth should jump by 4.2 percent next year, before leveling off with a 1.6 percent rise in 2013.
Despite a Las Vegas unemployment rate of 14.2 percent and the state’s rate ticking up to 13.4 percent in August, the region added jobs in the first four months of the year, he said.
“Employment will need much stronger growth to digest the under-used work force,” said Wong, adding that while hospitality industry employment is improving, that sector represents only 30 percent of the local economy.
“If only 30 percent of the economy improves, any recovery is going to be a long one for Las Vegas,” he said.
Overall nonfarm payrolls were expected to increase 0.3 percent this year, 1.8 percent in 2012 and 1.4 percent in 2013. Lackluster job growth over the next two years was attributed to continued weakness in the construction industry.
Wong’s outlook for construction and mining employment this year was for a 12.3 percent decline, followed by a drop of 7.8 percent next year and a modest decline of 3.5 percent in 2013.
Another positive was the region’s housing market, which he said has finally hit bottom. The average home price in Las Vegas today is $112,000, down from $295,000 in 2007, a decline of 61 percent over the last four years, he said.
Wong said it would take a lot of momentum to move the market in a positive direction.
“We are not going to see a very powerful rebound in the housing sector,” he said.
Overall, Wong said there was a “tremendous amount of uncertainty” in the economic outlook for the United States and Europe through the end of next year. He forecast a 1.5 percent jump in the nation’s gross domestic product this year, followed by 1.9 percent in 2012 and 2.2 percent in 2013.
“To bounce back from recession,” he said, “GDP should grow by 3 percent to 4.5 per cent, sometimes 5 percent to 7 percent. We are nowhere near that growth rate.”
He said his forecast was in line with a revised estimate released Wednesday by the International Monetary Fund.
The IMF expects the U.S. economy to grow 1.5 percent this year and
1.8 percent in 2012, That’s down from its June forecast of 2.5 percent this year and 2.7 percent next year.
The IMF has also lowered its outlook for the 17 countries that use the euro. The fund predicts 1.6 percent growth this year and 1.1 percent next year.
Wong credited the nation’s slightly better growth estimates to “cleaning up our own problems very quickly” when the recession hit. In Europe, Wong said, “the governments can’t agree to solve their own problems.”
Paul Single, senior vice president and director of fixed income investments, agreed, saying the Troubled Asset Relief Program, also known as TARP, might have been controversial but “it got the banks profitable again,” while the “Cash for Clunkers” program brought back consumer demand when it was needed.
Single described the last four years as a financial recession. He said unlike previous recessions in which the economy has rebounded sharply following a steep decline, recovery from the sharp decline in 2008 will take longer as companies, government and consumers balance their bottom lines.
Contact reporter Chris Sieroty at
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