Local economic index shows slight improvement

The Southern Nevada Index of Leading Economic Indicators showed a small uptick in November and appears to be bouncing along a four-month bottom, a UNLV economic research analyst said Wednesday.

The index registered 126.23 in November, compared with 125.77 the previous month and 129.90 in November 2008, when the financial collapse on Wall Street was starting to grip the nation.

After declining dramatically in 2008 and early this year, the index has fluttered around 126 since August, suggesting a leveling off of the downward slide, said Bob Potts, assistant director at the Center for Business and Economic Research at University of Nevada, Las Vegas.

“How long until that trajectory more closely matches that of the national trend is another turning point still some distance in the future,” Potts said.

The economic index, compiled by the UNLV research center, is a six-month forecast from the month of data, based on a net-weighted average of each series after adjustment for seasonal variation. November’s index is based on September data.

The accompanying 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.

Half of the index’s 10 categories contributed positively to the index, led by 62.6 million gallons of gasoline sold and 3.06 million visitor volume. Commercial and residential building permits contributed negatively to the index with 19 and 418 permits, respectively, in September.

Potts, who worked under the late Keith Schwer at UNLV, said the national index of leading indicators uses gross domestic product. Because GDP is not measured in the local economy, the best indicator for Las Vegas is employment, he said.

All of the index categories are tied to jobs, from gasoline sales and taxable sales to visitor volume and convention attendance, Potts said. Total employment declined 6.7 percent in October to 848,300 and the unemployment rate rose to 13 percent, compared with 7.7 percent a year ago.

“We’re in a new decision-making paradigm,” Potts said. “We may get to a place where job losses are leveling off.”

A separate Clark County Business Activity Index rose to 165.06 in September from 160.46 in August, though it’s still down from 180.60 a year ago. All three series that make up the index — gaming revenue, taxable sales and employment — contributed negatively to the index.

Potts said he’s looking for better numbers in the next four to six months as the economy overcomes the slowdown in discretionary spending that followed the financial meltdown last year.

Las Vegas will probably get a boost from the opening of CityCenter, the largest megaresort ever developed on the Strip, said Jeremy Aguero, principal of Applied Analysis business advisory firm.

He remains bullish on the $8.6 billion project by MGM Mirage that’s been a lightning rod for critics who say Las Vegas is overbuilt.

“The last four development cycles pushed the market forward in total employment, gross gaming revenue and visitation,” Aguero said. “Granted, the economic situation is unique. No major opening has occurred in a downturn like this. Okay, we accept that, but we think people will come to Las Vegas in increased numbers because it opened.”

Jeff Thredgold, principal of Thredgold Economic Associates and consultant for Utah-based Zions Bancorporation, said both the U.S. and global economies need to show growth before Las Vegas comes out its slump.

Some analysts are saying the economy will stabilize and then “double-dip” back into a recession, the W-shaped recovery. Others are talking about a more robust V-shaped recovery, Thredgold said.

“The consensus says we’re still facing headwinds in commercial and residential and unemployment is staying higher than we’d like,” he said. “The confidence level is still shaky. This recession has been the longest and deepest since the Great Depression.”

Thredgold said the global economy is growing in Asia and India, and he estimated 2.8 percent growth in the United States next year.

On Wednesday, the Obama administration announced it wants to extend the Troubled Asset Relief Program, or TARP, to stimulate lending to small businesses and prevent more home foreclosures.

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