Riding out the recession

Analyst says economy will stay down for most of 2008

April 15, 2008 - One thing Jeremy Aguero has learned as a research analyst is that tomorrow looks a lot like today.

He examined four periods of economic downturns in Las Vegas, including the past 12 months, and found that nearly every key indicator dropped each time.

The only exceptions this time are total employment and visitor volume, both of which gained modestly, the principal of the Applied Analysis financial consultancy said during 2008 Las Vegas Perspective, an economic forum held April 3 at the Rio.

Population growth, taxable spending and new housing permits are all down in Las Vegas and the unemployment rate is up to 5.4 percent, he said.

"When will we hit the bottom? I get asked that a lot," Aguero said. "November 2008."

That's a fairly optimistic outlook considering the onslaught of negative economic news. Jobless claims rose to more than 400,000 last week, the highest level in two years. Clark County had a record 6,152 preforeclosure filings in March. Soaring gasoline prices threaten to limit visitation to Las Vegas and cut into disposable income.

Consumer-based businesses are "rightsizing" as spending slows, Aguero said.

"Businesses are going to have to find a sustainable equilibrium when consumers don't have that $50,000 equity to take out of their homes," he said.

The housing market will hover around the bottom for the next six to nine months, following the "U" shape that Home Builders Research President Dennis Smith alluded to at his recent housing outlook, Aguero said.

Expect a full recovery of the housing market by 2010 and likely a shortage of residential units by the end of that year, reversing today's glut of 23,000 homes for sale. Aguero said Las Vegas will need a quarter million new residential units over the next three years as 40,000 to 100,000 jobs are added to the economy.

The 39 million visitors who come to Las Vegas each year will pick up the slack in some areas of the local economy, Aguero said.

"They pay a lot of taxes. Don't tell them," Aguero said. "They gamble, we tax them. They eat, we tax them. They stay in a hotel room, we tax them. We tax them when they get off the plane and we tax them again when they get on the plane."

Nevada Development Authority President Somer Hollingsworth, meanwhile, said 50 percent to 60 percent of the state's general fund comes from the resort industry. It's an incredible revenue source that's helped Las Vegas weather past recessions better than other parts of the nation, he said.

The development authority's efforts to diversify the economy are working, Hollingsworth said. In 1999, 24 percent of the local work force was in gaming and hotels. That number dropped to about 19 percent in 2007.