Southern Nevada’s recession expected to worsen from mild to bad

Southern Nevada’s economic recession is expected to worsen from mild to bad in the next couple of years, though most indicators are forecast to show growth relative to a weak 2008, UNLV economist Keith Schwer said today.

A mild recession has an unemployment rate of 7.5 percent or less, while a bad recession is defined by unemployment of 7.5 percent to 15 percent.

That’s where Las Vegas is headed, topping 10 percent at some point, Schwer told about 200 business leaders at his annual economic outlook.

“This is not going to be a mild recession. This is going to look like the bad recessions of the ’70s and ’80s in terms of unemployment,” the executive director of the Center for Business and Economic Research at University of Nevada, Las Vegas said.

Schwer’s forecast for Southern Nevada shows 9.9 percent growth in hotel and motel rooms in 2009, 4.5 percent growth in housing permits and 3.7 percent increase in visitor volume. Only one of the seven categories Ñ personal income Ñ is forecast to be negative, down 2.5 percent.

Population and job growth, the drivers of Las Vegas’ economy in the 1990s and early 2000s, have slowed dramatically.

They’re projected to grow 1.6 percent and 2.6 percent, respectively in 2009.

Schwer said the risks to his forecast are the same as they are on the national level, primarily the credit markets and fiscal policy. Travel remains vulnerable to terrorism.

The story line for Las Vegas is “decoupling the myth” that the local economy is somewhat immune to what’s going on nationally, he said. That’s not true.

Now that gaming is widely available throughout the country, people who get the gambling itch have high-quality casino choices closer to home. Gaming and tourism are discretionary spending, and while Las Vegas weathered down cycles in the past 25 years, the scene is clearly changing, Schwer said.

The question is how will travel trends change.

“What happens here, stays here. That may not be what people are looking for,” he said in reference to Las Vegas’ catchy advertising slogan. “They may want value. Maybe people are not looking for top shelf. We may have missed our brand here. Our brand used to be value.”

Schwer presented charts and graphs on Southern Nevada’s leading economic indicators, most of which generally showed steep downward trends from 2006 to 2008.

The construction, tourism and business activity indexes compiled by the UNLV economic research center have all declined from their peaks, though the construction index has turned back up from its low point in January 2008.

“We’ve had a sharp decline in gaming revenue and we’re adjusting to a new environment,” the economist said. “Construction activity slowed and we lost a lot of jobs, not so much because of housing, but because of the national credit markets.” Economic pessimism is widespread, according to a business outlook survey conducted by the research center. In 2007, 28.4 percent of responding companies anticipated hiring additional employees within the next three months. That fell to 7.2 percent this year.

Las Vegas outpaced the country in job growth through the recession following the 2001 terrorist attacks, through the recovery period of 2003-04 and through the expansion of 2005-06. However, job growth slowed to 0.9 percent in Las Vegas in 2006-07, compared with 1.3 percent nationally, and turned negative in the recession that started in late 2007, Schwer said.

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