Southern Nevada economy seen in first recovery stage

Southern Nevada's economy is in the initial stages of recovery and will be much better next year, UNLV economist Stephen Brown said Tuesday at Economic Outlook 2012.

Recovery that began this year will continue, but probably at a slower pace than the overall U.S. economy, the director of the Center for Business and Economic Research told about 300 business leaders meeting at M Resort.

He's forecasting growth in every economic indicator series in 2012, led by a 5.1 percent increase in visitor volume and 4 percent increase in gaming revenue and housing permits. Employment and population growth will remain under 1 percent, as it was in 2011.

"We consolidated our losses and started growing in 2011, and in 2012 and 2013, we'll see the fruits of that growth," Brown said. "What we're seeing is not only the end of declines, but we're beginning to see growth here in Southern Nevada."

Tourism is definitely showing an upward trend. After suffering some down years, visitor volume has rebounded to 2007 levels and hotel occupancy has climbed above 85 percent, though average room rates have fallen 25 percent to 30 percent since 2007, Brown noted.

Today's visitor profile differs from 2007's visitor . They're coming from farther away and they're staying longer, but they're gambling less.

"They spend less on gaming, more on other things. We're seeing a shift of Las Vegas becoming more of an event destination," Brown said.

Recovery will remain slow in sectors such as real estate and construction, with construction moving sideways, or going up and down from month to month. That's a good indication it's at the bottom of the cycle, the economist said.

The Case-Shiller Home Price Index and data from Las Vegas-based Home Builders Research show home prices continuing to drop. That's troubling, Brown said. However, the erosion of housing prices -- which is happening nationwide -- will end next year and that will boost consumer confidence.

"We're seeing houses sell for below replacement cost. That's something that's not sustainable," he said.

What will help Southern Nevada's recovery is a stronger U.S. economy, Brown said. The Western Blue Chip Economic Forecast shows employment and income growth in all Western states for 2012, led by Utah's 3 percent employment growth and better than 5 percent income growth.

CBER's Business Confidence Index topped 100 for the first time in 2011, though "financial headwinds" preventing many smaller firms from getting credit and holding back economic expansion in Southern Nevada, Brown said.

Asked about a "jobless recovery" during a question-and-answer period, Brown responded that the nation and Southern Nevada are "not technically" in a jobless recovery because jobs are being created in sectors of the economy that are expanding.

"We're not seeing it in construction, but we are seeing it in business services and gaming," he said.

Europe's financial turmoil won't directly affect U.S. markets and financial institutions in a negative way, Brown said. It could actually benefit the U.S. if people move money from there to safer U.S. investments, he said.

No recession is imminent at the national level, Brown said early in his presentation. Slowing GDP and a drop in the stock market indicate a recession may be imminent, but those indicators are often unreliable.

"I would disregard them. Economists like to say the stock market has forecast 10 out of the last three recessions. It's very volatile," Brown said. "Oil prices, the yield curve and the U.S. economic index are saying no recession. I think we're on the cusp of strong gains in U.S. economic activity."

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.