Though many business leaders think a recession is imminent, current economic forecasts show only a mild slowdown for Southern Nevada’s economy over the next 6-12 months. That is the big takeaway of the Fall economic outlook report released today by UNLV’s Center for Business and Economic Research (CBER).
The CBER team says that the initial recovery from the pandemic recession looked a lot like a “V-shaped” recovery. Since the beginning of the recovery, Nevada experienced two quick expansions followed by two longer pauses or slight declines in economic activity. This created more of a “broken-V” recovery.
Data that tracks the leisure and hospitality sector has been moving in the wrong direction for the past several months, according to CBER economists. They argue that the two-quarter decline in real GDP growth in the first two quarters of 2022 was a false negative signal. Now, however, events at the national and local levels call into question the continued growth of the Southern Nevada economy.
“We are not in a recession yet,” said Andrew Woods, director of CBER. “But an economic slowdown is in the cards for 2023.”
The report and accompanying analysis of the local, state, and national economy was shared on Nov. 17 during CBER’s Fall Outlook conference at the UNLV Thomas & Mack Center’s Strip View Pavilion. The event also included a discussion about economic diversification and a panel on the clean energy sector in Southern Nevada.
Though personal income and population growth both remain positive and largely unaffected by the pandemic recession, the major risk to the Nevada economy at the moment is whether the Federal Open Market Committee will tighten too much and for too long.
“It’s better for the Federal Reserve to deal with the devil they know, inflation, than the devil they don’t, the eventual fallout or slowdown in the economy over time as higher interest rates catch up with spending,” said Woods. “Inflation is of greater concern and the Fed continues to have room to act as consumer spending and a tight labor market give them a runway to continue to raise interest rates.”
Key Takeaways for the Southern Nevada Economy
- Unemployment has held steady since October 2022 at 4.6 percent.
- According to the Southern Nevada Business Survey conducted in September, 84% of respondents reported that they believe actions by the Federal Reserve will cause a recession. Nearly half (45.9%) of respondents indicated that we are already in a recession, and a number of respondents chose 2023 as the next recession year (31.1%).
- The Nevada economy and its tourism sector may face a slowdown or downturn in economic activity in 2023 and 2024, though the impact could be softened by a rebound in business travel and planned big-name events like Formula One or the Super Bowl.
- The Nevada Gaming Control report showed that the total gaming win equaled $1.249 billion for September 2022, 7.86% better than last year at this time.
- CBER predicts that visitor volume and gross gaming revenue will slightly decrease in 2023 (-0.6 and -1.1, respectively) and 2024 (-3.9 and -1.5, respectively), but unemployment is likely to remain steady at around 4.9% in 2023 as employers may be reluctant to let workers go.
- The Nevada housing market also is expected to participate in the slowing of economic activity as home prices are likely to fall by 10.7% in 2023 as a result of higher mortgage rates. Housing permits are forecasted to decline significantly in 2022 and 2024.
CBER Outlook Report
CBER’s biannual Outlook report forecasts economic trends for the U.S. and Nevada. Data is compiled from state employment, gaming, and tourism agencies and analyzed to predict local and national economic trends.