Respectable numbers expected for late 2013
A local economic forecast calls for single-digit unemployment, rising personal incomes and surging new-home permits.
But you’ll have to wait a while – until the second half of 2013 at the earliest. What’s more, uncertainty about regional, national and global economic trends could deep-six local recovery.
That’s according to an economic outlook released Monday by the Center for Business and Economic Research at the University of Nevada, Las Vegas. The forecast, presented to 200 local businesspeople and policymakers at the M Resort in Henderson, was full of hopeful projections, but the overall message counseled patience. Short-term trends look slightly positive, but serious breakthroughs in hiring, population growth and other indicators are half a decade away.
First, about those near-term trends. Southern Nevada is nearing a third year of “modest recovery,” and is set for more significant improvement in late 2013, said Steve Brown, director of UNLV’s Center for Business and Economic Research. The local economy should shake off its meager expansion rate and post noticeable gains between mid-2013 and mid-2014, as the U.S. economy picks up and conditions improve out West.
Local unemployment should retreat to 9.9 percent in late 2013 and 9 percent by the end of 2014. Personal income should tick up from $74.4 billion in 2012 to $76.8 billion in 2013, and $79.5 billion in 2014.
Tourism indicators are pointing up as well. Visitor volume will jump from 42.7 million in 2012 to 43.6 million in 2013 and 44.6 million in 2014. Gross gaming revenue will go from $9.4 billion to $10 billion through 2014.
Also, with rising home prices and the trickle of foreclosure inventory onto the market, UNLV economists project single-family home permits will rise from 7,425 in 2012 to nearly 11,000 by 2014. Population will edge up from 1.98 million to 2.04 million in the next two years.
A few things have to happen for those forecasted improvements to stick.
Right now, economic conditions in states around Nevada are looking up. Economists project 2013 job growth rates of 2.4 percent in Arizona, 1.8 percent in California and 3.1 percent in Utah. Job creation in neighboring states is important because those markets feed Nevada with tourists.
Nationally, employment growth is slowing and gross domestic product is nearly 6 percent below potential, but there are signs of life: Housing is recovering, oil prices are falling and consumer spending is strong. Per capita gross domestic product is set to recover to its prerecession peak by the end of 2013.
If regional and national economies slow, though, Southern Nevada’s upward course could flatten as tourists stay home. Plus, recession in Europe and slowdown in Asia could curb tourism growth. Then there’s the fiscal cliff, which Congress and President Barack Obama are still negotiating to avoid. Talks haven’t produced a solution, and lawmakers “may yet prove to be the Grinch who stole Christmas in Washington,” Brown said.
LONG TERM GROWTH LOOKS GOOD
But don’t fret for the long term: Thanks to its location in the heart of the West, Nevada has bright prospects in 2017 and beyond, economists said.
The West has led the nation for growth since the 1800s. The Great Recession’s toll on home equity left millions of Americans unable to move, but that trend will reverse as home values come back, said Lee McPheters, a professor of economics at Arizona State University.
Consider this: From 1980 to 2005, Nevada, Arizona and Utah made up three of the top four states for population growth. From 2000 to 2010, the West claimed the five fastest-growing states: Nevada, Arizona, Utah, Idaho and Texas. In 2006, nine of the 10 best states for job growth were in the West, including No. 4 Nevada, No. 2 Arizona and No. 3 Utah.
“You see a growth pattern that is expected to return when the overall economy turns to normal,” McPheters said.
PREPARE TO BE PATIENT
That return to normalcy could take a while. Expect three to five more years before the West sees prerecession economic numbers, McPheters said. The region continues to suffer from construction cutbacks, weak hiring, tight credit markets, shrinking government budgets, political uncertainty and a lack of growth sectors. Also, because the region’s rise was so outsized, so was its fall. Nevada had the nation’s worst job-market performance in 2009 and 2010, with Arizona ranking second. Nevada lost 14 percent of its jobs base from 2007 to 2010, while Arizona lost 11 percent. U.S. job loss averaged 6 percent.
Things also remain iffy across California, Nevada’s No. 1 feeder market for tourists and new residents. California lost 8 percent of its employment base – about 1.4 million jobs – in the downturn. Esmael Adibi, director of the Anderson Center for Economic Research at Chapman University in Orange, Calif., said California will gain back just 600,000 of those jobs between 2011 and 2013. On the bright side, that weak growth will spur a 4.9 percent increase in California’s personal income levels in 2013, slightly better than 2012’s 4.1 percent. Plus, home values are ticking up, though median prices are 40 percent below 2007’s peak.
More importantly, the state’s budget outlook calls for higher taxes, including a boost in the marginal income tax rate from 10.3 percent to 13.3 percent, Adibi noted. Nor is there any indication that the state’s “fundamental problem of government spending” is under long-term control, he added. In fact, after a recent presentation to a California legislative conference, Adibi said he “told everyone to move to Nevada.”
For its part, Nevada will see its own economic revival, economists said. It’ll just take at least five years to get there.
McPheters predicted that Nevada, which ranked No. 1 for population growth from 1980 to 2005 but fell to No. 24 in 2011, will return to the top two or three after the West completes its recovery in three to five years. Also, regional economists say Nevada should rank 18th for job gains in 2013, with 1.5 percent growth and 17,500 new jobs. Through 2015, Nevada should rank No. 16 for growth, and return to the top 10 after 2017. The message? Plan now for long-term growth and be patient.
Contact reporter Jennifer Robison at email@example.com or 702-380-4512. Follow @J_Robison1 on Twitter.
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