A grim picture was painted for economic development officials and business leaders during the Las Vegas Perspective 2020, an annual economic outlook event traditionally characterized by exuberance about Southern Nevada’s future.
Jeremy Aguero, the principal analyst at Applied Analysis and a regular presenter at such events, said travel and tourism that drive the area’s economy would most likely take between 18 to 36 months to recover from Covid-19 related decline.
“The public health crisis has rapidly transitioned into an economic crisis. Our economy is in recession, let’s have no doubts about that whatsoever,” Aguero said via Zoom at an event normally buzzing with the sound of business people, government officials and politicians networking.
Prior to the crisis, the hard-hit leisure and hospitality industry accounted for one of every four jobs statewide.
In metro areas nationwide, the average percentage of people employed in the leisure and hospitality industry is about 9 percent, according to data from the U.S. Bureau of Labor Statistics and analyzed by Applied Analysis. In comparison, the leisure and hospitality industry in Las Vegas accounts for about 30 percent of employment.
Compared to last year, visitation to Las Vegas has all but vanished in recent months, falling by 97 percent in April and 96 percent in May, according to data from the Las Vegas Convention and Visitors Authority.
“This is an economic issue as much as it’s a public health issue, at least that’s how it’s evolved,” Aguero said.
Since the phased reopening of Nevada businesses including major casinos — and for a few weeks in June and early July, bars — Nevada’s unemployment rate dropped, but the state still has more unemployed workers than during any recession in the state’s history, said Aguero.
Low wage workers in accommodations and food services have been hit the hardest by Nevada’s economic collapse, accounting for about 35 percent of unemployment insurance claims, according to data from the Nevada Department of Employment, Training and Rehabilitation. That’s about five times more than the next known industry, Administration, support, and waste management, which accounts for about 7 percent of unemployment insurance claims.
“As that public health crisis becomes that economic crisis it manifests itself in many important ways, not the least of which here in Nevada is employment,” Aguero said.
Employment in April 2020 was roughly equivalent to employment in September 2009 during the Great Recession, losing a decade’s worth of employment growth in the blink of an eye.
During the Great Recession, Nevada lost about 196,000 jobs over 2.5 years from 2008 to 2010, according to Aguero. The current crisis claimed 280,000 jobs lost in just 2 months.
Even more worrying, unemployment insurance claims in Nevada rose once again in July.
“This is what has us a bit concerned that it’s starting to come back up,” Aguero said.
About 22 percent of Nevada households are relying on unemployment insurance benefits, according to data from the U.S Census Bureau Household Pulse Survey.
The emergency supplemental $600 per week unemployment benefit passed by Congress, which has been crucial to households nationwide, expires Friday. The outlook for an extension of that benefit, or something similar, is now mired in uncertainty amid congressional wrangling.
About 21 percent of Nevada households did not make rent payments last month and about 34 percent expressed little to no confidence they will be able to make rent next month, Aguero said during the event.
Those fears are most pronounced among Latino and Black heads of households. In Latino Nevada households, about 48 percent had little to no confidence that they could make rent, and about 47 percent of African American households said the same.
But it’s not just renters. Nearly 1 in 5 homeowners said they did not make a mortgage payment last month
“The (CARES Act) stimulus that we have been relying on for the past two months is going to burn off, and that’s the biggest challenge we are going to be dealing with in the next few months,” said Aguero.
About 300,000 Nevadas also reported food insufficiency “sometimes” or “often” in the past seven days, according to data from the U.S Census Bureau Household Pulse Survey analyzed by Aguero’s firm.
Long-term damage to small businesses in Nevada is also increasingly likely. Almost 34 percent of small businesses said they could not reopen despite restrictions being lifted. In addition to not being able to afford reopening, business owners also reported difficulty employing necessary protection measures, and employees not willing to return.
In a survey of Clark County businesses 17 percent of those who participated said they have not been able to pay full rent since the pandemic.
The federal Paycheck Protection Program assisted employers representing about 525,000 jobs in Nevada small businesses.
Applied Analysis predicts consumer behavior in Nevada will take between 12 to 18 months to return to normal, around the time an effective vaccine for the novel virus is most likely to be developed.
Aguero briefly revisited the hallmark of Perspectives past: optimism.
Despite challenges facing Nevada the planned Allegiant Stadium and Las Vegas Convention Center Expansion were “a beacon of the recovery,” he said.
And touching on another staple of previous Perspective events, he emphasized a need for diversification in the state’s economy.
“I would suggest that economic development and diversification may be more important today than at any point in the state of Nevada’s history,” Aguero said.
Nevada officials have long sought to diversify Nevada’s economy, but results have been lackluster in the past.
Still, officials have pinned their hopes on diversification as a strategy for economic recovery including “reshoring” which involves getting industries like the medical equipment and pharmaceutical manufacturers from abroad to relocate to the U.S.
Any recovery will be dependent on federal programs pumping money into Nevada’s coffers, said Aguero.
“It’s not going to be easy and it’s not going to be tomorrow and it is going to be dependent on things like federal stimulus,” Aguero said.
“Like other economic downturns we will find our way through this. It’s just going to take a bit of time.”
Former MGM CEO Jim Murren, the chair of the Nevada Covid-19 Response, Relief and Recovery Task Force, also spoke at the event Tuesday, linking face coverings and social distancing to a quicker economic recovery.
“It is not your public right to not wear a mask,” Murren said.