LV economy keeps on ticking through housing downturn
Nov. 11, 2006
Copyright © Las Vegas Review-Journal
By HUBBLE SMITH
REVIEW-JOURNAL
With 7,885 new residents a month, 5.5 percent job growth and strong tourism numbers, Las Vegas’ economy keeps trudging through a downturn in the local housing market.
The Southern Nevada Index of Leading Economic Indicators moved modestly upward to 132.59 in October, compared with 132.3 the previous month and 131.75 in October 2005, according to the UNLV research center that compiles the index.
The residential component contributed negatively to the index in a substantial way, but other nonconstruction sectors have remained strong and the overall outlook remains positive, said Keith Schwer, director of the Center for Business and Economic Research at the University of Nevada, Las Vegas.
“What we’re seeing is a substitution effect. We’re not seeing great adversity from residential permits and construction,” he said. “I suppose in some ways we’re getting lucky. We’re jumping off one horse that’s tired and exhausted and getting on another one that’s fresh.”
The index is a six-month forecast from the month of the data, August, based on a net-weighted average of 10 series after adjustments for seasonal variation.
The accompanying Review-Journal chart includes several of the index’s categories, along with data such as new residents and employment and housing numbers, updated for the most recent month for which figures are available.
Four of the index’s 10 categories contributed negatively to the October index. Residential building permits dropped 37.4 percent from the same month a year ago, residential permit valuation fell 52.3 percent and commercial building permits were down 9.2 percent.
Residential construction indicators have declined by double-digit percentages, but other construction, such as that on the Strip, continues at high levels. More than $30 billion of development is planned for the Strip in the next 10 years.
“I think we’re just going to grow at a slower, more sustainable pace over the next few years because of the cooling-off housing market and its importance to the overall economy,” John Restrepo of Restrepo Consulting Group said. “The biggest problem is we’re still seeing relatively flat incomes. Our soft spot is income growth not keeping pace with the cost of living.”
Schwer predicted that economic expansion would continue over the next six months.
“All in all, construction is a mixed bag, but other key sectors are keeping Southern Nevada on a strong growth trend,” he said.
Travel and tourism expansion continues, he said. The center’s tourism index is up 5.8 percent from a year ago at 162.38. Gaming revenue rose 9.6 percent in August to $886 million. Passenger count at McCarran International topped 4 million in August, the third time in the last 12 months for that level. Strong visitor volume has kept hotel occupancy above 90 percent.
Building permit activity has slumped, yet construction employment increased 1.2 percent in August with 1,400 new jobs. This runs counter to construction job losses nationally, Schwer noted.
The research center’s Economic Outlook Conference is scheduled Dec. 19 at Green Valley Ranch Resort. Fee is $75. Call the center at 895-3191 to register.