VEGAS INC Coverage
Las Vegas business leaders are slowly gaining confidence in the recovery of the Southern Nevada economy but remain hesitant to hire.
A survey conducted by the Center for Business and Economic Research at UNLV is a mixed bag in that business executives, while more optimistic about the economy as a whole, continue to be pessimistic about the real estate and construction industries that have been hurt deeply during the recession.
For the second consecutive quarter, the Southern Nevada Business Confidence Index remained above 100—meaning more respondents gave an optimistic answer than a pessimistic answer about general economic conditions.
Some 45 percent expect no change in the economy through June, 30 percent expect improvement and 25 percent expect it to worsen.
Jeff Clemons, who heads MassMutual’s operations in Nevada, said business leaders are encouraged by growth in tourism and gaming revenue but want to see more before making decisions to hire. He said, however, he’s filling 15 to 20 financial planning positions because of a growth in business.
“I think given what we have come through economically, everyone is a little concerned about whether the growth will be maintained and how modest it might be,” Clemons said. “They’re optimistic about the long term but the short term gives people pause for spending capital and hiring people.”
The center recently issued a report that said its Southern Nevada Index of Economic Indicators grew by 1.02 percent in January. Led by gains in travel and tourism, it is one of the largest one-month increases in the 30-year history of the index. The center said that may mean job growth in the second half of 2011.
Stephen Brown, the center’s director, said the local economy has added about 3,500 jobs this year and any growth for the rest of the year will be less than 1 percent—likely in casino and hotel jobs and the service industry.
“Overall what we’re seeing is the economy coming off a deep bottom,” Brown said. “The unemployment rate is very high and even with moderate growth, things aren’t really going to look robust by historical standards.”
When it comes to the sales and profits of their industry, 53 percent of those surveyed said they expect no change in sales, but 37 percent said they expect improvement. Ten percent said they see a decline in sales.
As for profits, 48 percent project no change, 31 percent see profits increasing and 21 percent forecast a decrease.
“I think what the survey shows is a mixed bag,” Brown said. “If we compare this to previous surveys, it is better, but what we were getting in the past was all bad news.”
When asked about hiring in the survey, 12 percent project an increase, 24 percent project a decrease and 64 percent said no change.
Brown said that what local businesses are expecting, with profits and sales going up but not hiring, mirrors what’s happening nationally.
“Hiring is the last thing to improve, but they’re more optimistic because they are seeing increases in visitor volume, gaming and taxable sales along the Strip,” Brown said.
Local businesses—nearly 85 percent in the survey—said they didn’t apply for credit from banks.
Many fear they will get rejected, which has been the case for many as banks are still leery of business conditions, Brown said. Those surveyed weren’t so optimistic for the real estate and construction industries. Forty-four percent of the 81 people who participated work in the real estate and financial industry.
Nearly 74 percent said it would be at least 2013 before Southern Nevada home prices show signs of a meaningful recovery. Twelve percent project such a recovery in the first half of 2012 and 12 percent in the second half of 2012. Three percent said it would occur in the second half of 2011.
In the construction sector, more than 83 percent said there won’t be an increase until 2013 or beyond, while 6 percent said it would occur in the second half of 2012. Some 9 percent project an increase in the first half of 2012, while 1 percent said it will be in the second half of 2011.
Clemons said that pessimism is a reflection of the Las Vegas housing and construction market being one of the hardest hit in the nation.
“I think there are a lot of concerns, but [businesspeople] are cautiously optimistic by what’s happening with gaming and tourism,” Clemons said. “We’ve seen modest signs of recovery, but we’re not out of the woods yet.”