Wednesday, Dec. 15, 2010 | 12:50 p.m.
Improvement in the U.S. economy will trickle down to Nevada in 2011 and 2012 and slightly boost visitor volume and gaming revenue, according to a forecast released Dec. 15 by UNLV’s Center for Business and Economics Research.
But housing and commercial real estate won’t be driving any recovery for a while, the report said.
The semiannual economic forecast at M Resort echoes recent comments by the center’s new director, Stephen Brown, who said gains in gaming revenue and visitors in recent months are signs of recovery, albeit weak ones. It’s safe the say the local economy has hit bottom and can only go up from here, the forecast said.
The unemployment rate will drop in 2011 after peaking at 15 percent in September, and personal incomes will rise after declining steadily since the recession began, the report said.
“The Southern Nevada economy has shown almost no benefit from the weak recovery that the United States is experiencing, and the business mood in the region remains somber,” the report said. “But with the U.S. recovery gaining traction in 2011, the Southern Nevada economy will ... show signs of recovery.”
The gains will be stronger in the second half of 2011, and 2012 will be stronger than 2011, the report said.
It emphasized, however, that because the region’s economy is so reliant on gaming and hospitality, any recovery will have to be led by those sectors.
Although the increase in U.S. tourism is benefiting Las Vegas, visitors are spending less, the report said. One factor that’s likely restraining Las Vegas tourism is California’s economy has been slow to recover, the report said.
“We are at the point where we think tourism and gaming will pick up, but it’s still what I would characterize as a weak recovery,” Brown said.
UNLV projects visitor volume will grow 3.2 percent in 2011 and 3.3 percent in 2012 after growing 2.4 percent in 2010. Gross gaming revenue will increase 1.9 percent in 2011 and 2.3 percent in 2012 after increasing 1.2 percent in 2010.
Most of the gains won’t be because of individual tourism but because of conferences and conventions, Brown said. Corporate profits are higher than they were before the recession, and those companies can afford to send people to conferences in Las Vegas, he said.
An increase in personal income will reflect the economic recovery and a drop in the jobless rate, the report said.
The statewide jobless rate of 14.1 percent will decline to 13.2 percent by the end of 2011, and fall to 12.6 percent by the end of 2012, the forecast predicts. The unemployment rate reached 15 percent in September.
Personal incomes should record its first increase in 2011 since the downturn began in 2007. It will jump 2.5 percent compared with 2010’s rate, which had declined 2.3 percent from 2009, the report said. Personal income will increase 3.2 percent in 2012, it said.
Since Nevada’s outlook is tied to the growth of the U.S. and Western states’ economies, if either falters or stalls Southern Nevada’s recovery will be delayed, the report said.
“The national economy is on a path for a gradual acceleration of economic growth,” the report said. “As the recoveries in the U.S. and Western states’ economies advance, they will stimulate Southern Nevada tourism.”
Brown said extension of the Bush-era tax cut, extension of the jobless benefits and creation of investment tax credits will help with economy. Without those, the economy would be vulnerable to a double-dip recession.
“(Those) could benefit the economy and put money in pockets for people to spend, but we have to be careful not to go too far with tax cuts because the one thing that is looming out there is the budget deficit,” Brown said. “That will reduce our credit worthiness around the world.”
Las Vegas can’t count on the housing market, commercial construction or even diversification to make a dent in the economy for now, Brown said. He cites the inventory of empty houses, condos and apartments that hangs over the market and expressed concern about so many homeowners owing more on their homes than they are worth and a potential for a new round of foreclosures.
“It is going to be awhile before prices come back, and we build more houses,” Brown said. “Right now, houses are for sale for less than it would cost to build them even without a builder profit. There is not going to be a lot of construction.”
However, the drop in home prices and their stability make Las Vegas a bargain and that could help the region’s economic competitiveness by attracting industry and retirees and help existing industries attract employees.
The economy can’t count on commercial real estate being a leader as it once was because that won’t recover until about 18 months after the housing market does, Brown said.
As for diversification, Brown said that’s a long-term goal and the downturn can help plant the seeds for that. For now, it has to rely on diversification within the gaming and tourism industries.
“Tourism and gaming provide a fair degree of economic diversification,” Brown said. “Whatever industries are doing well in the country or world, the people working in those industries will come to Las Vegas for entertainment.”
Christmas and holiday retail spending look to be strong nationwide and in Nevada despite consumers not having the same balance sheets as in the past, Brown said.