Indications are housing slip dragging on local economy

Southern Nevada's economy, dragged down by the slumping housing industry, posted another month of modest performance.

New and existing home sales dropped 40 percent and new home permits are off by 45 percent, contributing to a 0.11 percent decline in the Southern Nevada Index of Leading Economic Indicators.

The index, compiled by the Center for Business and Economic Research at University of Nevada, Las Vegas, stood at 133.18 in August, compared with 133.24 the previous month. It is up from 132.26 in August 2006.

Seven of the data series were negative. The positive indicators were passengers at McCarran International Airport, visitor volume and gallons of gasoline sold.

"One thing we're seeing is a mass movement to liquidity that has caused the Fed and central banks to be concerned," economist and research center director Keith Schwer said. "That carries the news, but the real side of the economy is that it's relatively flat. We're not in a recession, though we've seen a year of residential decline."

In short, the index has tracked along a flat pattern for the past month or so with small percentage changes, he said.

The economic index, compiled by the center, is a six-month forecast from the month of the data (June), based on a net-weighted average of each series after adjustment for seasonal variation.

The accompanying Review-Journal chart includes several of the index's categories, along with data such as new residents and employment and housing numbers, updated for the most recent month for which figures are available.

The number of new residents moving to Las Vegas dropped by double-digit figures for the third consecutive month, to 6,168 in July.

Seeing all the vacant homes, Andrew Pugh of SellFastLV.com wonders how many people are leaving Las Vegas, though he's certain more people are coming than going.

"It's just unfortunate we can't nail down the historical numbers and really figure out if the current numbers are changing significantly," he said. "My contention is that the lack of white-collar jobs and relatively high housing costs would eventually slow down the migration, but without good data, it's hard to know for sure. Affordable housing was one of the big draws and now that's pretty much gone, for now."

Schwer said construction employment, which accounts for 17 percent of Southern Nevada's work force of 943,200, has remained flat as commercial construction picked up slack from residential.

"If all of these cranes are still operating in a year, we will have done very well going through a sharp downturn," he said. "We're going to have to starting hiring in 2008 for the expansion in '09."

Nonresidential construction shrugged off the turmoil in home building and credit markets in July to post another solid gain, Associated General Contractors of America chief economist Ken Simonson said.

Although construction spend- ing slipped 0.4 percent in July and residential fell 1.4 percent, nonresidential spending climbed 0.6 percent, the 10th consecutive monthly gain.

For the first seven months of 2007, total construction was down 3.4 percent and residential plummeted 18 percent compared to the same period in 2006. Those figures obscure the 15 percent jump in nonresidential spending, Simonson said.