It isn’t hard to see that the recession is hitting Nevada hard. People living in Las Vegas just need to look at the Strip. In boom times, only tourists and those with no other option would dare drive on Las Vegas Boulevard. Everyone else used Frank Sinatra or Koval to get around. Right now, the Strip is usable as a road.

You can see it in the casino parking garages on weekend nights. It is eerily easy to find parking. And when you see the half-full casino floor, you know why.

The general consensus is that things won’t be getting better anytime soon. Even the most optimistic of analysts say the recession will persist through 2009, and it won’t be until 2010 that things return to a zero point. Others don’t foresee a rebound until 2011.

In essence, the short-term economic outlook for Nevada is bleak.

Two questions immediately come to mind when discussing Nevada’s economic outlook for the coming year: Where are we going and what’s with this handbasket?

For the people who thought 2008 was bad—and it most certainly was—there is little room for hope in the New Year. In fact, depending on who you discuss the matter with, there might not be a lot of hope for 2010 either.

Yes, it really is that bad, or at least it could be.

The short story is that no one really knows what the future will hold. They can make predictions, but, as 2008 should clearly indicate, the predicative sciences are far from accurate. It took 12 months before it could be officially announced that the country was, in fact, in the middle of a recession.

Nevada has been hit particularly hard. What was once one of the strongest economies in the country is now one of the most troubled. Foreclosures are happening at a record-setting rate, home values have bottomed out and jobs are disappearing.

It shouldn’t be too surprising that Nevada would be hurt in times of economic crisis. The saying that Nevada is recession-proof or Las Vegas is recession-proof is wildly inaccurate. How could it not be? Discretionary spending fuels Nevada’s chief economic engine.

With the whole country hurting—and, for that matter, the majority of the rest of the world feeling some side effects of the trouble in the U.S.—fewer people are coming to Las Vegas. Most people understand that it is not advisable to take a Las Vegas vacation when they can’t afford to pay their mortgage, car payment and utility bills. And those who do come have less money to spend. Hotel rates might be reduced now, but at best that offsets the increased cost of an airline ticket into Las Vegas because of reduced flights into McCarran.

The latest news from the Nevada Economic Forum, which projects what the state will collect in tax revenues, is that the state will see a 9 percent drop in revenue for fiscal year 2009.

These numbers come despite the opening of a number of casinos scheduled for 2009. CityCenter, Fontainebleau, M Resort and Cosmopolitan Resort are all scheduled to open this year, but the Economic Forum noted that other market conditions will limit the impact these projects will have.

“Although Nevada’s economy stands to benefit from the major construction projects currently in progress, the potential net direct and indirect impacts may be less than previous construction expansions and new casino openings in terms of employment and visitor growth,” the Economic Forum final report states. “Although these construction projects provide important construction jobs, the current situation in the residential and commercial construction market provides for a much weaker construction employment situation than historically recorded during previous casino construction cycles.”

Alan Schlottman, professor of economics at the University of Nevada-Las Vegas and executive director of the Theodore Roosevelt Institute, said he is concerned about national conditions and how they will impact Nevada. The current recession does not fit the typical model of starting in the consumer sector and spreading into the corporate sector; it was exactly the opposite, starting in the corporate sector and then spreading into the consumer sector. Not only did consumers lose confidence and reduce spending, they were also faced with a corporate sector that reduced spending by eliminating jobs. Schlottman called it a “double whammy” for consumers.

The ultimate conclusion of TRI is that the current recession will last at least another two years (eight to 10 quarters).

As far as the impact on Nevada, he uses the economics adage, “You can’t push on a string.” (For non-economists, the statement essentially means that if people don’t want to spend money, they are not going to, and they won’t be enticed to do so through any sort of policy.)

“We’re very concerned about the gaming industry having to be really careful with expenditures over the next couple of years; if we modify that statement a little bit for Nevada, you can’t push on a string of discretionary expenditures,” Schlottman said.

For those looking to dismiss the TRI as overly pessimistic, Schlottman offered up as bona fides the institute’s prediction last year that California would face a $19 billion deficit, far more accurate than official figures that suggested the deficit would only be about $5 billion.

He also pointed to a possible contradiction when discussing the opening of new casinos in 2009 and 2010: their overall economic impact is still predicated on the demand for their product. If the demand isn’t great enough to generate a revenue that supports a staff of 4,000 or 5,000, then the number of jobs created won’t be as beneficial to the local economy as earlier predicted.

Nevada’s economic woes have become so indicative of the problems facing the entire country that a congressional panel analyzing the effectiveness of the $700 billion federal bailout came to Las Vegas to see how it was working outside of Wall Street.

“Our economy has gone from the fastest growing in the nation to among the worst,” state banking commissioner George Burns said at the panel meeting.

Others in attendance provided a simple answer to the question of whether the bailout is working. The answer was no.

Rep. Shelley Berkley pointed out what is obvious to almost anyone: that the bailout has had “no discernable impact” in Nevada.

Of course, part of the problem with the bailout is no one knows where the money was spent, but by the best estimates, the original plan of purchasing distressed assets has not been realized. Yes, $350 billion has already been spent, but details about those expenditures have not been made public.

The news is grim and the outlook is not pretty. Schlottman recommends that business people take to heart the prediction that the economy will not rebound from this recession quickly. And the prediction of the TRI that the end could be as many as 10 quarters away means that it could be more than two years before the economy returns to the condition it was in back in the middle of 2007, before the recession officially started.

“Hopefully I’m wrong,” Scholttman said. “I would love to be wrong. Unfortunately, we have some track record on being the pessimistic doom and gloom fellows.”

By Greg Jones

Greg Jones is managing editor of Casino Connection Nevada, as well as associate editor of Global Gaming Business magazine.

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