With memories of 2008
still fresh in our minds,
it's no wonder
talks of a possible
recession have
the nation on edge.
Despite Nevada
being hard hit
last time around,
some believe
our state is now
recession-proof.
We're talking to
experts on both sides
of the debate.
That's next
on Nevada Week.
♪♪♪
 Support for Nevada Week
 is provided by
 Senator
 William H. Hernstadt,
 Cashman Equipment
 and additional
 supporting sponsors.
♪♪♪
 At the height of
 the Great Recession,
 Southern Nevada's
 unemployment rate
 skyrocketed
 to over 15%.
 Many economists blamed
 our singular economy,
 arguing relying
 predominantly
 on gaming and tourism
 left us vulnerable
 during the crash.
 Now over a decade later,
 talks of another
 recession are
 swirling nationwide.
"Wealthy families
are actually
"stockpiling cash
on recession fears..."
"...as a key predictor
of recession
"is now flashing
for the first time
"since 2007."
"To get to a recession
in the next two years
"really requires
some shock."
 However, some economists
 believe Southern Nevada
 may now be more
 resistant to recession
 due to our expanding
 business portfolio;
 the Golden Knights,
 Amazon, Google,
 the Raiders
 and so many more
 now call Nevada home.
 To discuss
 the possibility
 of a recession
 and how our state
 could be affected,
 we're joined by
 John Restrepo, principal
 of RCG Economics;
 Tom Blanchard,
 president-elect
 of the Greater Las Vegas
 Association of Realtors,
 and Mike PeQueen,
 managing director
 and partner of
 HighTower Las Vegas.
(Kipp Ortenburger)
John, I wanted
to start with you.
This isn't probably
not a simple question,
it seems like
it's a simple question,
but are we headed
for a recession?
(John Restrepo)
Well, we have been
in a 10-year expansion
which is pretty long,
and there are--
most economists
are saying
some kind
of correction.
It could be
a mild recession.
I don't think anyone's
anticipating another
"great recession,"
but there are some
indicators out there
in terms of slowing
job growth numbers
at the national level
and a slowing in
manufacturing activity.
So there's probably going
to be some adjustment
probably in the next
12 to 18 months,
but I don't think
it's going to be
something as intense
as we saw in 2008.
-And I know at least
in the media,
this is something that's
been presented recently
that's maybe caused
somewhat of a scare,
is that the bond market
and the inverted
yield curve,
which is something
that has happened
in previous
recessions,
especially in 2007.
Is that still as
strong of an indicator
as it was let's say
10 years ago?
-No, not as strong.
Mike can speak
to that because
he's more of
the financial guy.
That inverted
yield curve thing
is kind of an interesting
event or issue.
We look at it I think
a little more closely
at rates of
growth in jobs,
rates of
growth in wages.
In the case of here
in Southern Nevada,
rates of growth
in visitation,
and we do see
some slowing
in the rates of growth.
So where that takes us
I'm not sure,
but there is going
to be a slowdown.
The main thing
we need to understand
here in Southern
Nevada is--
and I think we do now,
I don't think
we fully realized it
before the
Great Recession--
and that is whatever
happens in Europe
and Asia and globally
and nationally
affects us directly
here in Southern Nevada.
We may be a physically
isolated community
but we're not
economically isolated.
-Mike, let's talk more
about the yield curve
itself but also
other indicators.
We're talking about
some of the national
and global
concerns we have.
What are some
of the things
that you're
looking at now?
(Mike PeQueen)
When we look
at the big picture
of what
affects Las Vegas,
we have to realize
that we're both
a national and
international city.
We sell the ultimate
consumer discretionary
product:
Recreation.
We require everybody
to come here
and pick it up.
We have 20%
of our visitors
coming from overseas,
and they spend probably
about 25% of the
total spend because
they stay longer
and spend more.
So Las Vegas has
to have a global look,
and the global economy
and the national economy,
as John said,
are slowing a bit.
Still some strong
underpinnings,
and I don't think that
we fall into a technical
recession in 2020,
but there's no question
that we're seeing
a bit of a slowdown.
-And something else
that's been in the media
is a lot of the more
wealthy individuals
globally are redirecting
a lot of their money.
They're stockpiling
is the word
that's been used,
converting a lot
of money to cash
or looking at more
recession-proof
types of investments.
Are you seeing that
locally as well?
-Yes, it's not
unusual as John said.
We're now in year 10
of this expansion.
That's the longest,
and by the way,
slowest expansion
in the history
of the United States
and it's been there
for 10 years,
and people know
that eventually something
does have to happen
in our economy,
some sort of slowdown.
I agree with
John completely.
It doesn't have to be
nearly what we saw
in 2008; in fact,
it can be much shallower
than an average recession
when it does come
probably after 2020
in my opinion.
But I think it's very
normal for people
who have investments
to turn some of that
into cash in
anticipation of that.
You know, there's
an old saying,
however, the stock
market has predicted
nine of the last
five recessions.
So you can't read too much
into the market action
to determine if that's
really going to happen
because it's very
difficult to call
when a recession
really will occur.
-And we're talking
about growth,
we're talking about maybe
there's some ambiguity
on what we can
call it a recession.
Tom, in the
housing market,
we've seen
exponential growth.
We've seen just
a very healthy market
that's flattened
a little bit.
What are you seeing in the
house market right now?
(Tom Blanchard)
Well, I'm sort of glad
this whole slowdown
has happened
because it's given
the housing market
some breathing room,
otherwise we'd
end up with some--
I've always explained it
as a pressure cooker.
You gotta let some
steam out of it
or it will blow,
and we've let some steam
out of the market
and thank God.
So with this
slow growth,
with the slowing
of housing prices
going up
astronomically,
we're allowing some
of the steam to come out,
let growth prices
catch up on jobs
and allow everybody
to take a breather,
catch up, and
then we can move on.
Otherwise it's just
a disastrous outcome.
-What are some
of the reasons
that we're seeing
maybe a slow
in our local
housing market?
We have really low
mortgage rates right now,
but yet we're not seeing
necessarily the purchases.
Is there
a reason for that?
-Well, I don't know what
the real reasons are,
but I look at it as more
of a balanced market.
We have great
mortgage rates
but a tight market,
so it's balanced.
Everything seems
to be more in balance
which causes it to
look like it's slow,
and no understanding of
why we're not moving up
like we have been.
And look, back
in the old days,
you know, 10, 15,
20 years ago,
a 3% increase
in your appreciation
of a home
was great growth.
That was
expected growth.
Now 3% is going
oh, my gosh,
the sky is falling,
the sky is falling.
Now, that's just
not the case.
We're getting back
to a normal kind
of a market which
we used to have
which was
a healthy market.
-John, about the
mortgage rate, right?
We're now right now
under 4% I think,
3.5% this morning,
but we're looking at
unemployment rates are
about 4% for our state.
I mean, have we had rates
that have been this low
on unemployment and
mortgage rates before?
-Not in a long,
long time,
but I think we have to
go back to the mid '90s
or early '90s
to get the low
unemployment rates
that we saw,
and I don't think
the mortgage rates
have ever been
this low.
And Tom makes
an excellent point.
The good thing
about real estate,
it's pretty
easy to observe
whether it's commercial
or residential,
and that is that
prices go up and down
based on demand
but it's all tied
to wages at some point
in economic growth,
and we were getting
into a situation here
that we were concerned
about last year,
it's even worse in Reno
in certain ways,
of housing
affordability.
The disconnect
between wage growth
and housing
prices was really
getting out of hand
in my opinion,
and leading almost
to where we were
in '06 and '07
which was kind of scary
because it had then
a ramification
of the spillover
on economic development
and business attraction
if you're known
as an expensive
community,
housing-expensive
community.
So the fact that it's
cooling off is good,
and Tom makes
an excellent point.
Years ago when I
bought my first house,
if you get 3%, 4% growth
a year, that was great.
We started believing
8, 9, 10, 12
was a permanent state
of mind, and it's not.
It's not a good thing
in the long term.
It sounds good
when you're selling.
It's not a good thing
when you have
those kinds
of rates of growth.
But there's some issues
out there right now,
but I mean
it's cooling off,
and we're getting
to more and more stable,
sustainable growth
barring any unknown
circumstances that
maybe Mike can speak to
in terms of some
economic disruption
that causes
some challenge,
but I think it's steady
as she goes right now.
-And Mike is saying
if we do have
some type of slowdown
or a cooloff
that is maybe
"recessionesque,"
it's not going
to happen in 2020.
Do you agree with that?
Do you think
we're looking at
a couple years off here?
-Yes. I mean,
the consensus among
most economists,
and the financial guys
look at things
a little differently,
it's 12 to 18 months
so probably late 2020,
early 2021 we'll see
some kind of correction.
Again, it's going to
depend on if we continue
seeing a slowing
in the rate of growth
in manufacturing
at the national level,
the trade issue,
the job growth numbers.
So we're tracking
things very closely.
We're really
looking at changes
in rates of growth.
That's what is
slowing a little bit.
-Let's talk about the
change of rates of growth.
We mentioned the trade.
This is a big thing
in the media too,
trade wars and tariffs
and that potentially
being the catalyst
to a recession.
Are you seeing that?
I mean, let's just say
that no trade agreements
happen prior to
the 2020 election.
I mean, is that
going to expedite
what might happen here?
-There's no question
that the trade war
is a cloud hanging
over the economy
and the markets
right now.
Earlier this week
we saw the manufacturing
numbers come out
for the United States
showing that
manufacturing
has fallen technically
into a recession.
Now, we don't have
a great deal
of manufacturing
in Nevada
and it's only about 12%
of the national economy,
but it is something
that people look at
as a bellwether.
Then we saw the
non-manufacturing,
the services sector
came out this week,
and it was also
much slower nationwide.
So we see two very
important things
this week that tell us
that the economy
in the United States
is slowing,
and it has to do
with where we are
in the cycle
and it has to do
with the trade
situation.
And we've gotta mention
that three or four
of our largest
employers
get a great deal
of their revenue
from outside
the United States.
Our gaming companies get
a great deal of revenue
from Macau and in
some cases Singapore,
and we'd be foolish
not to understand that
that tension between
the United States
and China has the
ability to spill over
and impact our
biggest employers.
-Do you think we have
any chance of trying
to make deals before the
presidential election?
It seems--and maybe I'm
assuming too much here--
that they don't
have much incentive
to make trades
before the election.
-Well, that's
a good question.
I think there's certainly
a chance they will.
It really depends
on both sides,
and it's a very
obscure process.
We don't know what
these talks involve.
We know that there
are some inequities
in that trading system,
talking about
forced intellectual
property transfer
and a variety of things
that have to be
corrected because
there is an inequity
between the two systems,
and China realizes that.
The question is
how motivated are they?
Well, these tariffs have
hurt them quite a bit,
and the Chinese economy
is feeling this
quite a lot so I think
there is a chance.
-John, let's talk about
just the consumer
spending side of this.
I mean, this is a huge
part of our economy,
and if consumer
spending is good,
typically we're okay.
Are we seeing any
indicators at all
that consumer spending
is also kind of
going into a recession?
-You know,
it's interesting.
I was looking at those
numbers yesterday
in preparation
for today,
and the retail
sales numbers,
taxable retail
sales numbers,
are still pretty strong
in Southern Nevada.
That's partially
driven by tourist
spending here as well.
I think 20 to 25%
of our spending
and taxable sales
come from tourists,
and that's
pretty healthy.
Consumer confidence
is still pretty strong.
Business confidence
is weakening a little,
and we see that in
some of the numbers
that come out of
the conference board.
The challenge
for us is I think--
and that is
we're starting--
I'm a little
concerned right now
as the job market slows
that a lot of our
consumer spending
is being driven
by growth in debt.
Consumer debt
is now ramping up,
and it's been ramping up
for about four
or five years now,
so that's people
putting money
on credit cards
and not living within
their means so to speak.
So that's been driving
the consumer spending,
and we'll see how long
that is sustainable
because people are going
to have to pull back
a little bit,
right, in terms of
if there's a concern
of a slowdown
on the consumer spending,
because around
70 or 75% of the
economy in general
is consumer spending.
So there's some
things out there
that we just need
to watch closely,
and what I say
at presentations
and when I talk
to clients,
I'd say listen, we're
not falling off the map,
but don't ignore
the numbers either.
They're going
to a bunker,
but if things are
starting to slow down
a little bit,
pay attention to it
and don't ignore it.
Don't stick your
head in the sand
and pretend
it's not happening,
just be aware that
things are relative.
Just be aware.
-Tom, I'm going to ask
you that same question.
We were talking about
consumer spending here.
We're talking about maybe
an increase in debt.
We're looking at
homeowners maybe being
a concern when
we're talking about
something like debt.
What are you telling
homeowners right now?
-Well, before
we get to that part,
let me get to
the consumer debt part.
What worries me is
as people build up equity,
they start churning
the home ATM
and start refinancing
their homes
with low interest rates
and pulling out money
to pay off
their consumer debt
and then recharging
on their credit cards,
and we start getting
into that spin cycle
which I think
partially caused
the Great Recession
because everybody
was getting equity,
refinancing,
and then doing it
over and over again
to where finally
at some time
you have to pay the piper
and there was no more
room to pull out equity
to pay off the
consumer credit cards.
-Are you seeing
any indicators
of that happening now
in the market?
-We have a lot of people
refinancing their homes
to get out and get
a lower interest rate.
But I don't know
if they're really
refinancing and
pulling money out
because I'm not in
the lending business.
It worries me
a little bit.
It's something
we need to watch.
Those that
are watching this,
I hope they're
not doing it.
But if they are,
be careful because
hopefully you
learned before
if you got caught;
don't do it again.
-Well, Tom makes
a good point.
If you're refi-ing a home
and taking the money out
and putting it
into savings
or investing it
with Michael,
for example,
is one thing.
Pulling it out and
buying another car
or going on a
vacation or whatever
you're going to do--
-You haven't learned.
-And you know Americans,
we just love
to spend money
unnecessarily.
-One of the groups hardest
hit during the 2007
recession as I said
were contractors.
We sat down with
the Nevada Contractors
Association's
CEO Sean Stewart
to discuss how the
industry has recovered.
Take a look.
(Sean Stewart)
2008 was the first time
we'd really experienced
a major slowdown
in Nevada history
that I'm aware of in
the construction industry,
so this was
all new territory.
For contractors
the recession
was really tough;
lots of them
had billions of dollars'
worth of backlog
that was erased
in one day.
We had over 110,000
workers in the valley.
A lot of our contractors
either had to move out
of state or went
out of business.
I don't think
the market itself
has rebounded
to our 2006 levels.
We lost a lot of workers
in the recession,
and not all those
workers have come back.
Most of the contractors
that survived
are here today and lived
through the recession.
They understand
what needs to be done,
they understand
how to right size
and diversify.
For a long time
our contractors
built casinos
and highways.
That's what we did.
As you've seen
there's a lot
of new industry
coming to town.
Project Neon,
CityCenter,
I'm working
on Resorts World,
the stadium.
Almost every major
project in the valley
is done by members
of the Nevada
Contractors Association.
We heard so much
in the recession
that we needed
to diversify.
My question to them
would be
have we done enough?
Do you think we're
diverse enough now
that if tourism
takes a slide
because of a
nationwide recession,
will we have enough here
to keep us busy?
-So John, I want
to come to you first.
You've talked a lot about
discretionary spending
and the fact that
we're a gaming
and tourism-fueled economy,
a retail-fueled economy
and then
construction as well.
It truly amplified what
we went through in 2008.
To Steve's question,
if tourism slides again,
how is our economy going
to fare this time around?
-It will get hit again.
I mean, while we've
made great strides
in moving
to having a more
economic
developed economy
or economic
diversified economy--
and there's
a difference between
economic development and
economic diversification
if you want to get into
the weeds with that--
we're still
lagging a bit.
It takes a long time to
turn the economy around.
The Great Recession
taught us
that we weren't
diversified.
The best I could tell prior
to the Great Recession,
our economic
development strategy
was to say California,
you're lousy,
we're not.
You see how well
that worked, right?
So we've made
great strides,
but we're still largely
a gaming-dependent
or visitor-dependent
economy.
About one-third of our jobs
are in the gaming industry,
lower than it was,
but it's still
a major part
of our economy.
So we're moving toward
that diversification,
but we are
one of the least
diversified economies
in the world--
in the country
for a metro our size.
-I'm assuming when we
talk about diversifying
our economy, I know
it's been 10 years,
and 10 years is a lot,
but doesn't it seem
like it's a lot when
you're moving a boat
or something like that
where you're diversifying
an economy away from
gaming and tourism?
Is that correct?
-Yes, it's hard
because it speaks
to the development
of the workforce,
it speaks to the
educational system,
it speaks to so many
cultural aspects.
There are huge
challenges, and time.
It takes a lot of time,
talent and treasure
as I like to say,
and political will
to really become
diversified.
Again we're
moving steadily
in that direction,
but we're still a bit
susceptible to downturns
in consumer spending.
And then finally when
you add the whole issue
of pending widespread
automation
across all industries
particularly
in the resort industry
and tourism industry,
that's another
issue that we need
to really think
about longer term.
-Yes, and Mike, longer
term but short term,
we're looking at what
we've done to diversify
and I gotta bring up
the sports angle
to this, right?
We're still visitors
and gaming and tourism,
but yet we do have the
Raiders coming in 2020,
and I just looked at
the convention schedule.
It's full, it's booked.
I mean, even if
we had a recession,
are we more
recession-proof
just based on how we've
kind of set ourselves
differently in the
tourism and gaming side?
-I wouldn't use the
phrase recession-proof.
What I'd say is during
this next 12 or 18 months
because of some of these
large projects we have,
we're somewhat insulated
from national trends.
They will catch up
with us at one point,
but we have
Raiders Stadium.
We have Resorts World.
We have the Convention
and Visitors Authority
expansion, and those
pump a lot of money
like steroids
into our system.
Those are jobs
that eventually
come to an end,
and those businesses
stop spending money
on construction
and we'll feel that
at one point.
We need the national
economy to be strong
at that point as well,
because we need to make
sure that national
consumers come here.
So we're not
recession-proof,
but we have this
fortunate timing episode
right now where we have
a bit of insulation
because of these
larger projects.
-Tom, let's talk about
construction then.
Back to the clip here,
we maybe have more
of a diversified
setup to weather
a recession
if it does come.
Are you seeing that?
Are you seeing
a more diversified
and a different way
of planning
how construction
is working?
-Yes, and remember all
those folks need homes,
and that's helped a lot
with our housing
and our tight inventory
that we have.
But the question I have,
it's hard to really
number exactly how many
of those folks
are working
in construction,
are renting
versus owning,
and right now you know
that if you're trying
to rent a house,
rents are just
astronomical
and hard to find.
I've heard one
construction company
is coming to do just one
section they're going
to build just of rentals;
not to sell
but just building
a whole section
of a community
that's just going
to be rental homes.
So that's a little
worrisome to me,
but we'll see
what happens.
So it's hard to say.
-If we were to hit a stage
where growth stopped,
both housing
construction stopped
and maybe more of the
commercial construction
stopped, how impactful
would that be?
-Look, Las Vegas
and Southern Nevada
is always going
to be a draw.
I think any time
there's been no growth,
prices have gone
off the charts
so it would be
a very good thing
for those that
did hold housing,
it would be terrible
for those that wanted
to come in.
So for those that had,
it's always good.
For those that
want to get in,
it's always bad when
you can't find anything.
-Mike, for the viewers
that are watching
right now and we're
talking potentially
about impending
recession,
nothing as severe
as what we saw in 2007
but yet we as consumers
probably could use
some advice on how to
tighten our belts now.
What kind of advice
would you give?
-Well, several things
have been mentioned
around the table
already here.
We're in a good spot
right now with people
seeing equity
in their homes.
They need to not draw
that down, right?
When I look at
what the consumer
is feeling right now,
the consumer wakes up
in general across
the United States
and realizes that the
labor market is strong
so they're probably
not at risk
of their job
going away.
Their home is worth
more than it was
several years ago
and it's fairly stable.
Their 401(k)
account is worth more
than it was at the
beginning of the year
and it's been going up
for a few years,
and when they go
to the gas pump,
they're not
feeling gouged.
Those are all
very important
indicators for
consumer confidence.
We don't have to be
brilliant here,
we just have to
not screw this up.
Don't overspend,
use any economic
opportunity
to continue to save.
We know Americans
and Southern Nevadans
just as well
are under-saved
for retirement
and for emergencies.
This is the time.
These are the
good times in which
we store our nuts
so we can use them
like chipmunks
down the road.
We have to do that,
and I don't know
if everybody is really
taking advantage of that.
-And John,
final question,
we just have about
30 seconds left.
Maybe our state and
federal legislators
are making sure they're
doing the right things
relating to policy to
make sure that we are
as recession-proof
as we possibly can.
What would you recommend
we as viewers
are communicating
to our local
and federal
legislators?
-I think one of
the major challenges
that I don't think
elected officials
at the federal
or state level
are thinking about,
and this is that
longer term thing
I mentioned earlier.
What is going to be the
impact to our community,
the quality of life
of our community,
to the workforce
in our community,
to our residents with
this rapid advancement
in automation
and how are we going
to adjust to automation
and create new jobs
to counteract the jobs
that can potentially
be lost in animation?
Most of the studies
that are coming out
say between
2030 and 2035
you're going to see
dramatic changes
in how economies
in the U.S. work,
particularly in urban
metros like Las Vegas.
So what are we doing
to prepare for that
longer term because the
cycle is going to come,
as we talked
about before.
But this longer term,
what they call fourth
industrial revolution
is a major issue
we need to really
get serious about.
-Great.
Thank you so much.
Thank you all,
we really appreciate
you being here
and for your time.
If you at home would like
to learn more about
any of the topics that
we have covered today,
check out
our website at
VegasPBS.org/Nevada-Week.
Before we go,
according to the Bureau
of Labor Statistics,
the unemployment rate
in Southern of Nevada
peaked to over 15%
at the height of
the Great Recession.
We sat down with
Three Square Food Bank
to discuss how they
helped the community
recover in 2008;
take a look.
♪♪♪
 Just as people were
 losing their jobs,
 Three Square
 Food Bank arrived
 to help feed
 those in need.
(Jodi Tyson)
Our first year of
operations was 2008,
but we did
officially launch
as a food bank at
the very end of 2007.
 If you ask
 almost any local,
 they'd tell you Three
 Square has been around
 for decades
 but in reality,
 the food bank has
 only been serving
 the valley
 for 12 years.
The food bank became
the fastest growing
food bank in the
Feeding America network.
We were kind of
getting started
with the typical
things that food banks
were already doing
and just had to do them
that much faster.
 According
 to Three Square,
 just under 13%
 of Southern Nevada
 is currently
 food insecure.
 Thanks to
 community donations
 and corporate
 sponsorships,
 the food bank
 is able to feed
 over 160,000
 people per month.
Everybody goes
through a time of need
and it's a wonderful thing
that in our community,
we have a community
safety net where people
are invited and
welcomed and supported.
We work with
about 180 agencies
across the valley
and those are members
of the food bank,
so those members
of the food bank
are actually the ones
that are distributing
food to those in need.
 Three Square's massive
 warehouse located
 near Pecos and Craig
 acts as a distribution
 center for the
 smaller agencies
 Three Square works with.
 With 17 million pounds
 of food to pack,
 the bustling
 building sees over
 32,000 volunteers
 every year.
That's about two times
the size of Boulder City,
actually, so that's
an amazing number
to be able to say
that many people
have come
through our doors
and have said that
they want to commit
their time and energy
to our mission.
 Although Three Square
 is always accepting
 volunteers, Vice
 President Jody Tyson
 says monetary donations
 go a long way.
With a dollar
we can stretch that
into three meals,
and that's because
we have bulk purchasing
power you don't have.
We're like Costco
on steroids.
 To learn more about
 Three Square or any
 of the topics we've
 covered on today's show,
 visit
 VegasPBS.org/Nevada-Week
 or find us
 on social media
 at @NevadaWeek.
♪♪♪
