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.