Southern Nevada’s economy is submerged in the deepest recession the United States has seen since the Great Depression, and not even the most extravagant megaresort opening in the history of Las Vegas is going to pull it out, a UNLV economist said Wednesday.
“The party’s over,” said Mary Riddel, associate professor at the University of Nevada, Las Vegas and interim director of the Center for Business and Economic Research.
Virtually every sector of the local economy, particularly tourism and construction, shed jobs this year, pushing the unemployment rate to 13 percent. Home prices have yet to find their bottom and foreclosures continue to mount.
Visitor volume declined for the second straight year, and those who come here are gambling less and leaving sooner.
“Now, CityCenter is the wild card,” Riddel said in reference to the $8.5 billion development by MGM Mirage, the largest privately funded project in U.S. history. “Some say it’ll create a huge surge in demand. Others say CityCenter will create an economic debacle.”
Riddel, taking over for the late Keith Schwer in presenting CBER’s annual Economic Outlook, said the local economy is going to lag any national recovery.
The forecast calls for a 5.2 percent decline in employment for 2010, a 3.8 percent dip in gaming revenue and a 3.8 percent loss in personal income. Hotel room inventory and visitor volume are expected to increase 2.7 percent and 2.5 percent, respectively. Housing permits and population growth will remain relatively flat.
“There’s nothing in the data that tells me this economy is going to make a turnaround,” Riddel said. “We’re going to see deep discounting in rooms. That attracts goldfish. They gamble less than whales.”
Travel Web sites are advertising rooms in Las Vegas as low as $33. The top pick is a $79 room that includes a $50 dining credit and 25 percent off spa services.
CityCenter is reporting strong room bookings early on, probably at the expense of other hotel properties, Riddel said. The massive project may spur new demand, in which case the forecast is too pessimistic, she added.
“The U.S. economy will recover, but it’s going to take a few months for us to catch up,” the UNLV economics professor said. “The U.S. economy has not recovered enough for people to come here and spend big budgets on travel.”
Risks to the forecast include a “double-dip” recession as the government’s stimulus program wanes, bankruptcies in hotel and gaming companies, and inflation and energy price hikes, she said.
Constant Tra, associate director of UNLV’s economic research center, estimated lost consumer spending of $893 million in 2008 and $920 million in 2009, a result of fewer mortgage equity withdrawals.
“People used the increase in home values as an ATM machine and that’s not happening any more,” he said.
Strip projects such as Echelon, Fontainebleau and St. Regis condo tower at Palazzo halted construction, costing the local economy $1.16 billion in lost construction in 2008 and nearly $2 billion this year, Tra calculated.
Also, 7,950 excess housing units built in 2008 displaced an estimated $614 million in residential construction and 5,500 excess units this year displaced another $424 million, based on average cost of $35 a square foot to build a new home.
One bright spot for Southern Nevada is the return of housing affordability, Riddel said. Median prices are well below the national average, which could stimulate some increase in population, particularly among retirees, she said.
Prices have fallen below the Case-Shiller Home Price Index trend line, but that doesn’t mean they can’t fall further, she said.
“I still think home prices will decline in Southern Nevada. I think there’s still space to adjust,” Riddel said.
James Smith, guest speaker at the economic outlook and chief economist for Parsec Financial Management in Asheville, N.C., said the global economy should improve in 2010 and 2011 and the strength of the recovery will be surprising.
“New investments in technology to stay globally competitive will be one of the main drivers of world economic growth over the next five years,” he said. “So will investments to increase exports.”
Contact reporter Hubble Smith at email@example.com or 702-383-0491.