Saturday, September 19, 2009

Las Vegas Unemployment Soars to new record - 13.4%!

It's certainly no secret to many here that I've been calling for a severe economic downturn in Las Vegas since the boom of 2005/6.

Las Vegas - A House of Cards Bound to fall

Early on, many considered my bleak outlook ludicrous, as past history has shown Vegas to be quite resilient and recession proof.

Well, seems that's not quite the case anymore.

August's statewide unemployment rate for Nevada was nearly triple the level from the recession's beginning in December 2007, when joblessness clocked in at 5.2 percent.

The August jobless rate in Nevada now stands at 13.2 percent as the recession continues to hammer the state and metropolitan areas - Nevada's jobless rate is now the highest on record - dating back to 1976 - and is currently the second highest unemployment rate in the nation, trailing only Michigan at 15.2 percent.

See chart I created below for visual reference - data from Nevadaworkforce.com



The Las Vegas unemployment rate is even worse than the State in which it's located - 13.4% (Note: I anticipate this rate will soon jump again as the ~ $10 Billion CityCenter construction project is finished up and thousands of construction workers are laid off)

The following comments regarding our true state & city unemployment picture came from the Las Vegas Review Journal (maybe they are finally catching on?):

“The employment department's published rate isn't a complete accounting of joblessness. The numbers come mostly from surveys of households and businesses. They don't include discouraged residents who've quit seeking work, nor do they account for underemployed workers who can find only part-time jobs. A state economist said in August that current overall numbers likely run close to 20 percent, and Keith Schwer (director of the Center for Business and Economic Research at the University of Nevada-Las Vegas) agreed with that analysis.”


Above comments sound very similar to a recent post of mine: True US Unemployment Rate > 20%

Job Losses:

Southern Nevada’s two largest industries, tourism and construction, have shed the most jobs, while only the education and health care sectors have added payroll.



With ~ 183,000 Nevadans now out of work, the recession has nearly depleted the state’s unemployment fund, forcing Nevada leaders to apply for up to $264 million in federal loans.

The money would cover jobless benefits through the end of the year, but some officials said Nevada could need more than $1 billion to get through 2010 if the economy doesn't make a dramatic turnaround.


Guess what folks - it's already baked in the cake and we'll be needing the $$!


Closing - how we got here and looking ahead:

Growth in Las Vegas was absolutely phenomenal through the last decade leading up to 2006/7. This was a decade of prosperity driven by cheap credit (both consumer and business) and rising asset values - spawned by the bubble policies of both our government and the (non) Federal Reserve. These monetary drivers created a consumer wealth effect and influenced a carefree lifestyle - tourists had lots of cheap, easy money and access to huge credit lines (HELOC, etc) if they needed more to spend in the City of Sin (all in the name of having a good time and living for the here and now). That lifestyle however has now come to an end and the huge party bills have come due (for the consumer, the city, the state and nation).

As stated in previous posts, Las Vegas’s economy has been completely dependent on the discretionary spending of vacationers (Airlines, Hotels, Restaurants, Shows, Gambling, Drinking, Strip Clubs, etc) and the city lacks any real diversification.

Now that tourism & discretionary spending have declined (due to collapsing property values, sinking retirement plans, lack of credit and rising unemployment rates) gaming revenues have cratered, hotel occupancy rates have fallen, construction has ceased and and thousands of local layoffs have followed.

These unemployed locals quickly find that they have very limited options, as the entire hotel, gaming & construction industry is feeling the same economic pains and no one is hiring - the lack of industry diversification in the city has been a killer!

Currently, with economists and gvt officials talking about green shoots and lights at the end of the tunnel, many consumers are holding on to the false hope a recovery is right around the corner. Unfortunately they will be sorely disappointed. Yes, there is a light at the end of the tunnel, but - unbeknownst to most - it's a high-speed, fully loaded freight-train barreling out of control.

Let's face it folks, the average American is now terrified about his/her financial future as the consumer wealth effect quickly disappeared in a puff of housing bubble released hot-air. Additionally, Joe-six pack is now in debt up to his eyeballs - and due to lack of new credit availability - he's unable to roll-over his debt as in years past. This has caused consumer spending (70% of the US economy) to fall sharply, leading to higher unemployment - feeding upon itself, etc.

Bottom line:

The Las Vegas economic situation is bad now, but we're no where near the end - unemployment will continue to rise as tourism flounders under the growing nationwide economic strain while the discretionary spending of those who do decide to come to Vegas continues to decline...

Note:
All this on top of our national economic crisis and the potential currency collapse (and 3rd world status) that lies in our future - induced by trying to bail out each/every one of our financial institutions and the attempt to print our way back to prosperity - it just won't work folks.

Other recent links on Las Vegas:

Las Vegas Homes $60 SF

Las Vegas: 81% Mortgage holders upside down

Las Vegas Housing Price Update

Snapshot: Las Vegas Commercial Real Estate

Las Vegas: Lady Luck has run out

Regards

Randy

7 Comments:

At 9/19/2009 12:04 PM, Anonymous Regular Reader said...

And more bad news, Moody's predicts Vegas home prices won't recapture their lost value until after 2023.

http://www.marketwatch.com/story/home-prices-wont-regain-peak-this-decade-moodys-2009-09-18

 
At 9/19/2009 2:56 PM, Blogger Randy said...

Superb link Regular Reader - Here it is again for those who don't want to cut and paste - click blue words below:


Analysts say it will take more than 10 years to recapture peak home prices

 
At 9/20/2009 6:46 PM, Anonymous T Z said...

The good time was financed by debt and fake wealth. Debt has to be repaid and fake wealth is, well, fake.

And during the good time nobody prepare for the bad time.

Everybody enjoyed the good time on the credit card.

So why should anybody outside, private and government, want to bailout or even assist such a reckless self-destructive culture?

Las Vegas should do itself a favor - check into AA and get sober. It is not Wall Street. It only gambles legally and stupidly.

 
At 9/25/2009 5:40 AM, Anonymous Regular Reader said...

Another link...A story of an underground community in Vegas I did not know existed.

http://www.thesun.co.uk/sol/homepage/features/2651937/The-people-living-in-drains-below-Las-Vegas.html

 
At 10/08/2009 10:38 AM, Anonymous Anonymous said...

The lack of diversification of the las vegas economy , along with a crumbling infrastructure (horrible roads, outdated sewage systems , water problem ) are going to be the inevitable demise. The worst isn't even close to happening yet either, wait until some of these big name casinos are forced to close their doors. Then shits really gonna hit the fan here. I can guarantee at least 3 big name casinos will close in lv in the next two years.

Don't think it's that bad, in the past two years las vegas has seen a 10k person a month swing. We went from 7k pple moving here per month, to now an amazing 3k a month leaving town.

 
At 10/24/2009 12:29 AM, Anonymous Anonymous said...

You gotta check out the link above posted by "Regular Reader", it's the LV version of NY's "Token Suckers"! Ok, so now that the town is fully built into it's "family entertainment" theme which was going to bring in the Jones'es from Topeka with their 4 kids and ride in a gondola, or a roller coaster, the Jones'es ain't got no jobs. I remember the early '80s when the Strip started at the El Rancho and there were a lot of boarded up clubs. The T-Bird became the flashy-funky Silverbird which was actually a fun place to play some $2 blackjack back in the day. Then they put a roof over Fremont Street and made it a Disney esque parade of lights. I kind of liked it the way it was, brash and wild. I saw a young lady run out of the Golden Nugget and throw her cocktail at a guy in the middle of the street one morning while the old lady in her wheelchair selling pencils and trinkets on the sidewalk watched without even a grin. There was cop car parked across at The Mint, but never saw any cops. I used to like the hot neon lights on your skin and the tacky $100,000 in silver, gold or $100 dollar bills spinning around inside plastic displays next to the sidewalk. Now you can live in a tunnel and suck virtual tokens from the millions of rows of push button slots in the Bellagio...BOooRRRING!

 
At 10/24/2009 12:50 AM, Anonymous Anonymous said...

Laughlin had a thing going in the '80s, Don Laughlin's Riverside parking lot wasn't even paved and it was friggin' PACKED on weekend nights. Lots of nice cleavage laden ladies with only sheer "coverups" over their bikinis leaning over the craps tables. When I see the Travel Channel programs highlighting Vegas and the "ultimate" suite at Caesar's with it's view of the Strip, I have to yawn. I'd much rather take in take in the view of the river and the desert sitting at a slot machine at the Colorado Belle through it's huge windows looking east.

 

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