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Economist Upbeat about Las Vegas Economy

LAS VEGAS -- Low interest rates, sustained job creation and a robust housing market bode well for Southern Nevada's economy in the next couple of years, a top local economist said Wednesday.

The tourism industry, a primary generator of economic activity in Las Vegas, will continue to experience pockets of doldrums, said Keith Schwer, director of the Center for Business and Economic Research.

"We're seeing modest growth figures by historical standards, but still, it is economic expansion," Schwer said at his Midyear Economic Outlook 2003 at the University of Nevada, Las Vegas.

The risks to his economic forecast: more terrorism and deflationary prices.

Schwer's forecast calls for 2.8 percent growth in Clark County employment in 2003 followed by 3.5 percent growth in 2004.

The swings of business activity in Southern Nevada invariably hinge on construction and tourism, he said.

Looking closely at those sectors, he noted that construction has overtaken tourism since 1994. Construction employment grew 9.1 percent from 1995 to 2001, compared with 5.8 percent for tourism in the same period.

The difference was more dramatic following Sept. 11, 2001. For the next 15 months, hotel employment dropped 7 percent, while construction employment grew 1.1 percent.

The story throughout the national recession has been a jobless recovery, said Mary Riddel, associate director of the research center and assistant professor of economics at UNLV.

After reaching 6 percent in December, the national unemployment rate fell to 5.6 percent in March and then shot back up to 6.1 percent in May, the highest rate since 1994, Riddel said, and that's probably an underestimation.

"After a while, people become discouraged and they no longer look for work, then they're no longer counted as unemployed. Only those who are actively seeking work are considered part of the work force," she said.

Schwer was close on his 2003 forecasts for gross gaming revenue and visitor volume in December, when he projected growth of 2.3 percent and 1.8 percent, respectively. For the year to date, gaming is up 2.2 percent and visitors are down 0.7 percent.

Sluggish gaming revenue growth can be blamed on general uncertainty in the U.S. economy, a drop in demand for travel throughout the country and the lack of megaresort openings that typically attract a new wave of visitors to Las Vegas.

As for housing permits, "We screwed up," Schwer admitted. The number has increased 18.9 percent for the year, compared with his projection of 4.9 percent.

Schwer said the strengths of the local economy are a resilient business environment, Las Vegas' status as a world-recognized destination resort and the city's momentum.

"We have economic momentum and we have economic strength compared (with) neighboring states," he said.

Glenn Christenson, chief financial officer of Station Casinos, attended Schwer's presentation and concurred that Las Vegas is moving forward with momentum.

"Most of these people (Wall Street investors) can't get their arms around our growth," he said. "Three (percent) to 4 percent is incredible, certainly relative to where they live.

"Another thing that makes these numbers more intriguing is that they come without significant development on the Strip. We've got all the right ingredients here, a proactive government, a tax climate that's favorable for both businesses and residents."

Schwer said Las Vegas is by no means immune to the national economy. However, it's often late to enter into recession and among the first to recover.

"Consumer confidence has been buoyed by the end of the war and that's a positive indicator," he said. "We're beginning to work our way out of the recession."

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