The phrase “in a depression” appears more appropriate than “in a recession” to describe the current health of the Las Vegas economy. The city has the sixth highest unemployment rate among the 50 largest metro areas in the United States. It has experienced a 32% year-over-year drop in house prices, almost twice the national average. And it has seen residential building permits fall by 64.5% year over year in the latest month.

Reflecting the weak state of the metro area’s economic health, employment fell by 6.3% year over year in May, primarily due to weakness in two of Las Vegas’ key industries, construction and leisure-hospitality. Over the past year, employment in construction has declined by 17% due to the bursting of the housing bubble caused by the collapse of the subprime mortgage market.

At the same time, a nationwide slowdown in employment and discretionary household spending has led to a 4.7% year-over-year drop in the number of visitors to Las Vegas and caused gaming revenues to slide by -13.6%.

Looking forward, while the Las Vegas economy has not yet turned the corner in terms of economic growth, a number of recent indicators suggest that the corner is in sight. First, the Southern Nevada Index of Leading Economic Indicators − published by the University of Nevada, Las Vegas − turned positive in May for the first time since late 2007.

Second, although the most recent Manpower Employment Outlook found that hiring plans of Las Vegas employers were weak in the third quarter, the medium-term employment outlook starts to brighten with the planned launch of the MGM Mirage City Center project. This location should provide over 10,000 jobs when it opens late in 2009.

Also, the recently announced Telus International call centre will have an initial staff of 200 and potentially add a total of about 1,000 new positions once it becomes fully operational in five years.

Looking forward to 2010, the effects of a strengthening of national and global discretionary spending should mean that folks will be heading back to the gaming tables in increasing numbers, thereby helping to breathe more life into the moribund Las Vegas economy.

Employment Growth: Las Vegas, NV vs Total United States

*”Year over year” is each month versus the same month of the previous year.

Data source: U.S. Bureau of Labor Statistics (Department of Labor).
Chart: Reed Construction Data – CanaData.