UNLV official: No recovery until 2011 for Southern Nevada

Any signs of economic recovery in Southern Nevada won’t come until 2011, and that’s assuming the recession doesn’t take a double dip as some economists have warned, the director of UNLV’s business research center said Tuesday.

The local economy lags the national recovery as record-high unemployment and tight discretionary spending have dogged the tourism industry, Mary Riddel said at a midyear economic outlook presented by the Center for Business and Economic Research.

Las Vegas has lost about 140,000 jobs in the past three years, including 80,000 high-paying construction jobs and 20,000 leisure and hospitality jobs. That has created a fiscal crunch for Nevada’s state budget and 14 percent unemployment, among the highest in the nation.

Riddel’s forecast calls for a mixed picture for the remainder of this year and a slow turnaround in 2011, with modest 2 percent growth in visitor volume and 1.2 percent growth in gross gaming revenue.

She also projects a 1.5 percent increase in housing permits, 1.1 percent increase in personal income and minimal growth in employment, population and hotel rooms.

Southern Nevada’s economy is starting to show positive signs, though it’s probably going to take at least six months before the region sees a boost in economic activity, Riddel told a crowd of about 200 people at the Palazzo.

She said the biggest risk to her forecast is a double-dip recession as the government’s $787 billion stimulus package fades out.

“If we get a double-dip recession, all bets are off. A double dip would be devastating for Nevada,” she said. “I think a lot of the consumption and spending we’ve seen comes from this stimulus. The economy is in trouble. Let’s build a scaffold around it called government spending. My concern is when you pull this scaffold away, you might not see that recovering economy.”

Other forecast risks include airlines cutting routes and raising fares; a sharp drop in international visitors, especially if the euro depreciates further against the dollar; and inflation and energy price hikes.

The University of Nevada, Las Vegas economics professor was generally pessimistic in her assessment of Southern Nevada’s key indicators.

Unemployment is closer to 22 percent counting the “underemployed,” or part-time workers who would rather be working full time, she said. Job losses have spread into broader segments of hotel and gaming, retail and services as both tourists and residents spend less.

There’s excess supply in both commercial and residential real estate. Construction permit activity is 15 percent of its peak in 2007.

Waiting lines for a taxi at McCarran International Airport are shorter. Plenty of seating is available at casino table games. Average hotel room rates have dropped below $100 a night.

“In the next six months, don’t expect things to be any different than they are now,” Riddel said. “We may see modest improvement, but we’re not going to come out of this like gangbusters.”

Population growth should exceed the national average of 1 percent a year but will not return to levels that saw Nevada leading the nation in growth during the boom years, said Constant Tra, associate director of the UNLV research center.

Estimated by Clark County Comprehensive Planning Department at slightly more than 2 million in 2009, population will grow to 2.5 million by 2025 and to nearly 4 million by 2050, Tra projected.

Visitor volume and gaming revenue may show real signs of life in the first quarter, paving the way for some job creation, Riddel said.

One of her most serious concerns is the massive national deficit, she said. Taxpayers funded the American Recovery and Reinvestment Act, the “Cash for Clunkers” program and the homebuyer tax credit, which many analysts fear could lead to rampant inflation in coming quarters.

Also, small businesses can’t get a loan. They account for about 75 percent of the U.S. work force but won’t be hiring if they can’t get financing, Riddel said.

“The idea behind TARP (Toxic Assets Relief Program) was to build up reserves for the banks,” she said. “Here’s the problem: We gave them the money, but they haven’t been lending it out. This could be the core reason why we’re not pulling out of the recession.”

Looking for something positive, Riddel pointed to the health care industry as a possible avenue for economic diversification in Southern Nevada, as well as planned construction of a wind-turbine plant that is expected to provide 1,000 new jobs.

An economic report from the Brookings Institution showed that the Intermountain West states made little progress toward recovery in the first quarter as steep employment declines weighed heavily on the region.

While gross metropolitan product growth slowed in the first quarter, it remained positive and grew at a faster rate than the national average in every city except Las Vegas and Albuquerque, N.M.

Las Vegas “remains uniquely damaged and suffered another quarter of minimal output growth and job loss,” the report said. Gross metropolitan product in Las Vegas grew at a feeble 0.3 percent during the quarter, up from 0.2 percent in the previous quarter.

The region’s overhang of real estate-owned, or foreclosed, properties increased in every city except Las Vegas, though inventories remain elevated, Brookings reported.

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