Thursday, January 10, 2008

Bubble markets to rebound?

Dean Foust writes:

In Las Vegas, the construction of new casinos is giving rise to bulls who predict that a housing rebound is around the corner. To quote from this article by Associated Press reporter Ryan Nakashima:

One think tank already is predicting a housing shortage by late 2009, assuming workers flock to the state to fill jobs created by billions of dollars of new construction on the Las Vegas Strip.

"We're merely at the bottom of one cycle and heading back up on another one," said Jeremy Aguero, one of Applied Analysis' principals.

He points to the stream of Strip mega-resorts planned to go up over the next few years, from Las Vegas Sands Corp.'s $1.8 billion Palazzo, opening in January, to Boyd Gaming Corp.'s $4.8 billion Echelon in 2010.

In all, the surge is estimated to add more than 40,000 hotel rooms by 2012 and create around 100,000 direct and indirect jobs, according to Deutsche Bank.

The problem in my mind is that most of those 100,000 new jobs will pay minimum wage. The casinos are not exactly known to be enlightened, nor generous, employers. The other article was a column in The Washington Post by Steven Pearlstein, who was reacting to some fanciful predictions by a local economist Steven Fuller:

Next Friday in Tysons Corner, Steve Fuller and his colleagues from George Mason University will release their annual outlook for the Washington area economy. The title of this year's confab:

"Will Housing Recovery Drive Growth?"

That's right, folks, housing recovery. As Fuller sees it, with the local economy likely to add another 40,000 jobs this year -- just slightly below last year's 44,000 -- and unemployment at historic lows, the only way to fill those jobs will be to recruit people from somewhere else. Obviously, those workers and their families will need somewhere to live. And with new-home construction at recession levels, it will be only a matter of months before the existing inventory is sold off and builders start breaking ground on new houses and condos.

And there you have it: a rebound in residential construction, a big new spurt of public construction and a steady flow of federal procurement contracts, all conspiring to keep the Washington economy growing at the modest annual rate of 2.8 percent in 2008.

It's just what the local business community desperately wants to believe. And it's all part of the larger story of how Washington has the strongest regional economy in the nation and is basically recession-proof.

Too bad it's also a fantasy.

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