Threat Of Recession Looms Like A Dark Cloud Over Nevada
Growth in the global economy is stalling. Trade tension with China is at an all-time high.
So is a recession near? Many economists say yes.
However, Stephen Miller, the director of the Center for Business Research at UNLV, is not one of those economists.
"I think that the economy is pretty strong," Miller told KNPR's State of Nevada.
Miller said some of the indicators that economists look at to determine if a recession is coming are still in the positive territory. But he is not painting an entirely rosy picture.
"I would say we are heading toward a slowdown," he said, "Everybody is predicting, we're predicting also, that GDP growth will slow down well under 2 percent, maybe under 1 percent, but we're not seeing a recession."
A recession is when the GDP or Gross Domestic Product is in negative territory for two consecutive quarters or more.
Miller is not alone in his assessment of the economic forecast. Vivek Sah is with the Lied Institute for Real Estate Studies at UNLV. He is also predicting a "correction" rather than a recession.
"We are already seeing that correction in home prices," he said, "In early 2019... home prices growth was close to double-digit, close to 10 percent. Now, the last few months, they're close to 3 to 4 percent which is close to very, very realistic, normal growth."
Sah said there are going to be neighborhoods, particularly newer neighborhoods with more new homes being built, that will see a fall in prices.
He said the price of new construction is overpriced in Las Vegas. Sah said that is one of his big concerns about the valley's housing market.
"The pricing on those new constructions is way, way ahead, way, way more than - from the affordability perspective, from the income perspective - than resale," he said.
One good thing about those new home developments, he said, is home builders are smarter than they were before the Great Recession. Some of the smaller builders have disappeared and the larger ones take a national view of the housing market.
Sah also believes the home builders aren't the only ones who are smarter after the housing crisis of 2008. He believes home buyers are also smarter and are prepared for the market correction ahead.
One area of the economy that Sah is concerned about is the lack of economic diversity around the state. After the Great Recession, everyone from government leaders to business executives talked about diversifying the economy.
However, he doesn't believe that is something actually happened.
He is not alone in that opinion.
Former Clark County Commissioner Chris Giunchigliani said some efforts were made to bring in new businesses to the state but that vision of expanding the economic base beyond hospitality and mining hasn't happened to the degree needed.
"You had blips," she said, "You had Tesla up north. You had Raiders going down here. Those are ancillary pieces... we didn't broaden our manufacturing opportunities. There have been discussions about it but if you only look at one field, we did not diversify."
Giunchigliani also pointed out that Nevada's wages have not grown very much over the past ten years.
That lack of economic diversity could have a big impact on the state depending on just how severe the next recession is.
Hugh Jackson is the editor of the Nevada Current. He doesn't doubt the U.S. economy will go into a recession in 2020 or 2021.
He said despite the hype during the Great Recession about bringing new manufacturing jobs to the state the majority of jobs are still in the service industry, which has some of the lowest wages.
"When you get a downturn, people at the bottom are the ones that get hit hardest," he said.
In addition to workers with low wages getting hit when a recession does arrive, Jackson believes the State Legislature won't tackle some of the big issues like education funding and mental health services.
"None of those systemic problems will be addressed by legislators in 2021 if a recession hits because there is not going to be the money for it," he said. "There is going to be zero political will, I believe, among Democrats in the Legislature in 2021 to do anything about taxes because they're already going to be staring at Sisolak's re-election in 2022.
Stephen Miller, director, Center for Business Economic Research; Vivek Sah, LIED Institute for Real Estate Studies; Hugh Jackson, editor, Nevada Current