Las Vegas Sun

March 28, 2024

Booming economy to help LV prosper in 2000

Surprised by the continuing strength of the local and national economy, local researchers are predicting the current economic boom will continue through 2001.

Still, the researchers' study, released by UNLV's Center for Business and Economic Research Wednesday, calls for growth to slow over the next two years. And researchers warned that any number of factors could derail the strongest economy in at least 100 years.

"There are warning signs out there," said R. Keith Schwer, the center's director. "(Resort) overbuilding remains in front of us. There's the question of the spread of gaming (nationally) ... how will we remain ahead of the competition?

"But Las Vegas began this century as an unknown. It enters the next century with international name recognition and strong economic vitality."

Southern Nevada's employment is expected to reach 694,000 by the end of next year, up 5.3 percent on the year. That slightly trails the 5.9 percent growth experienced in 1999.

But labor shortages aren't expected to create a drag on the local economy, simply because the area is adding so many new residents. After rising 6 percent in 1999, the study projects Southern Nevada's population will rise an additional 5 percent in 2000, to 1.39 million.

The center's survey of 249 local businesses backs up those optimistic projections. Of the businesses surveyed, 42.1 percent indicated they would add employees within three months, and an additional 24.3 percent planned hiring in the next year. Only one-quarter of the businesses surveyed said they had no plans to expand.

That reflects growing optimism by local businesses. In 2000, 66 percent of executives said the local economy will expand; one year ago, that number was 36 percent. Only 4.9 percent predicted recession, down from 17.4 percent in 1998.

"Last year, respondents were pretty pessimistic," Schwer said. "Analysts were telling investors to get out of gaming stocks, that Las Vegas would get its come-uppance (because of huge expansion on the Strip). Optimism is now prevailing."

One element that shocked everyone was how well the market absorbed the new 12,300 hotel rooms added in Las Vegas in 1999 with the opening of the Venetian, Mandalay Bay, Paris Las Vegas and Resort at Summerlin. This was expected to damage occupancy rates significantly, but occupancy actually spiked, passing the 90 percent mark in the second half of 1999.

Mary Riddel, associate director of the center, attributed part of the market's strength to national advertising campaigns and the desire of visitors to see the new sights on the Strip.

But Schwer also noted that Las Vegas was helped significantly by the continuing boom in the American economy and the recovery of the Asian economies.

The key number for Las Vegas was the $6.36 trillion in disposable personal income earned by Americans in 1999, a 3.84 percent increase over 1998. That's driven not only by a strong worker's economy, but also a boom in the stock market.

"Clearly, the health of the nation's economy and wealth creation is very important in determining how many people will take vacations in Las Vegas, and how much they will spend while they're here," Riddel said. "We don't forecast any huge stock corrections in 2000, so the demand for Las Vegas tourism across the United States should still be strong in 2000. People will have jobs, they will have money, and they will have vacation money."

That said, visitor volumes are expected to slow down, simply because the hotel-building boom on the Strip is reaching an end. After shooting up 10.5 percent in 1999, to 33.8 million, visitor growth is expected to slow to a 3 percent growth rate in 2000, to 34.8 million.

"The primary reason for the slowdown is occupancy," Schwer said. "It's a little harder to stuff people in there when they want to be there."

The only major project that will open on the Strip in 2000 is the Aladdin. Still, that opening will push up Las Vegas' room inventory to 123,350 rooms at the end of 2000, up 1.6 percent.

That will also lead to a slowdown in gaming revenues, the study projects. After shooting up 12.3 percent in 1999, Clark County's gross gaming revenues are expected to reach $7.5 billion in 2000, a 5 percent increase.

Southern Nevada's growth will continue so long as the nation continues to boom, Schwer said, and he's not projecting any kind of recession through at least 2001. The nation's 3.8 percent growth in gross domestic product in 1999 took him by surprise; he'd projected growth of 2.1 percent.

In 2000, Schwer projects U.S. GDP will rise another 3.1 percent.

But it's becoming increasingly difficult for economists to predict future economic growth, Schwer said. In the 1970s, soaring oil prices sent a manufacturing-oriented U.S. economy into a tailspin. That isn't occurring in the 1990s, Schwer said, because the economy is more service-oriented -- an industry that doesn't rely as much on fuel prices.

But a service-oriented economy is also difficult to track. So far, explosive economic growth hasn't resulted in inflation, simply because worker productivity has increased so rapidly -- and employers are getting more production with higher wages. But service productivity isn't as simple to measure as it is in manufacturing, where productivity can be measured in tangible goods.

"The productivity rate will be hard to maintain, even with new technology," Schwer said. "Naive optimism (among stock market investors) is still there. There are building inflationary pressures, and a pending economic slowdown. But those storm clouds seem to be beyond the horizon of 2001."

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