Southern Nevada continues to lag U.S. improvements

WASHINGTON -- U.S. manufacturers ended 2011 with their best month of growth since the late spring. And the struggling construction industry spent more on projects for the third time in four months.

The data bolstered hopes that the economy is gaining momentum and helped Wall Street start 2012 with a bang.

Factories hired more workers in December, saw the most growth in new orders since April and ramped up production. U.S. builders spent more in November on single-family homes, apartments and remodeling projects.

The strong reports correspond with other positive signs for the economy. Consumer confidence is up, unemployment benefit applications have tumbled, and the unemployment rate is at a 42-month low.

But despite recent improvements in local economic indicators from taxable sales to visitor volume, Southern Nevada continues to lag nationwide gains, local experts say.

What is more, the fourth quarter's brisk national growth isn't likely to continue into early 2012, and slower economic growth nationwide could mean fewer discretionary dollars for trips to Las Vegas.

Local construction activity remained low at the end of 2011 and will stay that way until excess inventories of housing and commercial space built during the bubble are absorbed, said a Friday report from the Center for Business and Economic Research at the University of Nevada, Las Vegas.

Nor has the employment outlook budged significantly in recent months, with joblessness here stuck at 12.5 percent as of November.

What little job growth the city has enjoyed has come mostly from the leisure and hospitality sector, said Steve Brown, director of the center.

"We're not looking at a gangbuster recovery. We're looking at a recovery that's largely being driven by one sector," he said. "It's our biggest sector, but it's still a one-sector recovery."

LOCAL LENDING STYMIED

Banks are lending more to businesses nationwide, but a UNLV survey in December showed locals are still having a "very difficult" time getting loans, Brown said. Tight credit probably will continue until bankers see sustained local employment growth and an end to slipping real estate prices, he said.

Plus, a chunk of the nation's improvements last quarter trace back to pent-up consumer demand and dwindling inventories that needed rebuilding toward 2011's end, Brown added.

He is betting inventory growth won't be as strong in the first part of 2012, and that could rein in the nation's gross domestic product. GDP growth in the fourth quarter probably surpassed
3 percent, Brown said, but don't expect GDP to expand much beyond 2.5 percent to 3 percent in the first half of 2012.

Still, that would beat growth in the same period of 2011, when GDP increased 0.4 percent in the first quarter and 1 percent in the second. That slump came after a GDP gain of roughly
3 percent in the fourth quarter of 2010. Fiscal crisis in Europe, a U.S. debt-ceiling standoff and natural disasters in the manufacturing nation of Japan all dragged down economic growth in 2011.

Some of those factors may still be in play in 2012: Economists caution that Europe's debt crisis probably will slow global growth in the first half of the year.

But on Tuesday, the national outlook was mostly positive.

The Institute for Supply Management, a trade group of purchasing managers, said its manufacturing index rose to 53.9 from 52.7 in November. Readings above 50 indicate economic expansion.

The Commerce Department said construction spending rose 1.2 percent in November, the largest bump since a
2.2 percent rise in August.

Even Friday's UNLV report noted that despite lingering uncertainty, it appears Southern Nevada's economy has "turned the corner" and will improve as the national economy perks up.

The Dow Jones industrial average finished the day up 180 points. Broader indexes also climbed. Reports that manufacturing grew in China and India, two of the world's largest economies, also drove markets higher.

U.S manufacturing has expanded for more than two years, as factories were among the first areas of the economy to re-start after the recession officially ended in June 2009. They faltered over the summer after Japan's March 11 earthquake disrupted auto and electronics supply chains.

FACTORY ORDERS INCREASE

The December ISM survey showed many factories have largely recovered from their slump earlier this year

Exports rose despite the trouble in Europe. Growth in new orders means output probably will increase in coming months. And U.S. factories hired last month at the fastest pace since June, an optimistic sign ahead of Friday's release of December job creation numbers.

"All in all, an upbeat report," said Peter Newland, an economist at Barclays Capital, who said stronger manufacturing activity should contribute to faster economic growth in the fourth quarter.

The U.S. economy still faces plenty of challenges. Europe is likely in recession because of its ongoing debt crisis.

A separate survey of European manufacturers released this week found that factory activity shrank last month for the 17 nations that use the euro.

"It is hard to see the U.S. economy strengthening this year when the euro-zone is on the cusp of a potentially severe recession and when growth in Asia is set to slow," said Paul Dales, of Capital Economics.

CONSUMERS ARE WILD CARD

Consumers could pull back on spending. That would hurt because consumer spending is 70 percent of economic activity.

But for now, Americans are feeling a little better. The Conference Board last week said its consumer confidence index rose in December to the highest level since April.

And the number of people applying for unemployment benefits each week is dropping steadily, evidence that companies are cutting fewer jobs. Weekly applications have dropped by 10 percent in the past three months.

The economy generated an average of 143,000 net jobs a month from September through November. That is almost double the previous three months.

The economy probably grew at an annual rate of 3 percent or more in the final three months of this year, analysts say. That would top the 1.8 percent growth rate in the July-September quarter, and the 0.9 percent growth rate in the first half of the year.

Analysts forecast a modest expansion of 2.4 percent in 2012, an Associated Press survey of economists found.

Review-Journal writer Jennifer Robison contributed to this report.