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Gaming Guru

Hubble Smith

Las Vegas Economy: Indicators Continue Their Rise

26 August 2003

LAS VEGAS -- Nearly all of the Southern Nevada economic indicators for July rose from previous periods, suggesting economic expansion into late this year, a top local economist said Monday.

The Southern Nevada Index of Leading Economic Indicators, compiled by the UNLV Center for Business and Economic Research, climbed to 128.17 in July, based on data from May. It was 127.81 in June and 127.47 in July 2002.

Nine of the index's 10 indicators were up from the previous month and it was the second straight month of upward movement in the numbers.

The accompanying Review-Journal chart reflects several of the index's categories, along with other data such as new residents and employment and housing numbers.

"I think the fundamentals are right. The economy is holding up," said Keith Schwer, director of the research center and professor of economics at the University of Nevada, Las Vegas.

"One of the things underlying what's happening locally is the national economy. By the indicators, it's finally starting to gain some strength. So when you've got Southern Nevada and the national indicators moving in the same direction, then there is greater confidence in sustainable expansion."

Housing continues to drive economic growth in Las Vegas. Home Builders Research, a company that tracks the local housing market, reported 2,057 new home sales in July, an 18.8 percent increase from the same month a year ago.

More importantly, there were 2,359 home building permits pulled, bringing the year-to-date total to 14,529, up 16.2 percent from last year.

Sales of existing homes set a record in July at 4,661, a 29.6 percent increase. The median price was $170,000, compared with $152,000 a year ago.

"We have been prognosticating that robust new home sales would continue as long as mortgage rates remain at their historic lows," said Dennis Smith, president of Home Builders Research. "This is true, but the primary factor that will carry housing sales for the long term is, has been and always will be job growth."

Continued slow growth in employment numbers remains a major concern for the local economy, said Jeremy Aguero, principal of Applied Analysis, a Las Vegas research firm.

Total employment in Southern Nevada grew 2 percent in July to 803,200, but that's not keeping pace with population growth, he noted. Additionally, it translates into weakened demand for millions of square feet of office, industrial and retail space under construction.

"The other thing that's disparaging to us is the gap between incomes and the cost of housing," Aguero said. "It's going to be difficult for developers to build average-size homes for less than $250,000 by the end of 2004. It's concerning that personal income is increasing only 1 percent a year. People at certain incomes are locked into their homes."

On the positive side, taxable retail sales have been relatively robust, showing 8.3 percent growth to $2.12 billion in June.

Gross gaming revenue skyrocketed 16.8 percent to $656.4 million.

"Last month was humongous, but we don't think that's a true picture," Aguero said.

Although the unemployment rate dropped to 5.6 percent in June from 6 percent a year ago, the figures masked the underlying problems in Nevada's job market, said Jim Shabi, economist for the Nevada Department of Employment, Training and Rehabilitation.

New claims for unemployment benefits have stabilized since the sharp increase that followed the Sept. 11, 2001, terrorist attacks, but the average time spent on unemployment remains high at 14.4 weeks.

About 40 percent of the unemployed are unable to find work before their benefits expire. The duration and exhaustion figures are considerably worse than they were in the latter part of the 1990s when jobs were plentiful, Shabi said.

Asha Bangalore, an economist for Northern Trust in Chicago, showed the same concerns as Aguero about the link between the housing market and job growth.

"The big question ahead is if the economic recovery is sustainable," Bangalore said. "In the housing sector, although mortgage rates in recent weeks have risen from their historical lows, the levels of mortgage rates per se remain attractive. The missing link is employment to support further gains in home purchases. The key to continued growth in the housing sector is a pickup in employment, which we are yet to see."