In this week's cover story, Rana Foroohar and Bill Saporito cite This Time Is Different, a book by Ken Rogoff and Carmen Reinhart, to point out that "economic rebounds that come after financial crises are harder and take a lot longer, thanks to all the undwinding of debt that must be done in this case, largely from housing. No other postwar recession had to lift the deadweight of the real estate collapse that we've just been through." Case in point is the frenzied boom that swept Las Vegas, which became a horrific bust once the bubble burst. But even in Vegas, there are signs of a comeback though the betting on it by analysts is still tepid.
In 2004, Isabell Ysassi and her husband, Todd House, started a recycling business in Las Vegas. Renu Oil of America not only recycled used cooking oil from kitchens along the Las Vegas Strip, it also handled more traditional recycling of trash. House had been an executive chef at the Flamingo; Ysassi was a cook and later a dealer. She remembers the first time he asked for her help with recycling the trash. She had already worked a full shift and was wearing a skirt and high heels. He took her to the docks behind one of the casinos and told her to roll up her sleeves. "It was so embarrassing." She thought helping run the business meant "I'm gonna do clerical or boss people around, tell them what to do." Instead he wanted her to pick through garbage to sort out cardboard, plastic and aluminum. "This is your company," he told her. "You're gonna help me with this."
In the beginning, it was just him, her and one other employee. And then it became hers alone. House had a heart attack and passed away in the spring of 2008, just as the Great Recession deepened and business dried up. Ysassi, 52, turned to her two adult children for help even though they had established lives of their own. (One of her daughters was studying for the bar.) "They decided to give up their own dream to help me run the company."
By then credit was tightening. She and her kids stopped taking pay for themselves, but things got so bad they nearly defaulted on $44,000 worth of paychecks to their employees; at the last minute her son had to negotiate an advance payment from one of their clients, allowing Renu Oil to take payment early for recycled goods they wouldn't ship for a few months.
The quick thinking saved the business, and now the good-humored Ysassi is finally able to savor the dream her of her late husband. Over the last couple of years, the company has grown its business to several Strip properties as well as a few hundred local restaurants. They've installed sorting stations at the docks of several casinos, and they've grown to 200 employees, all of whom are receiving medical insurance, workman's comp and a 401K. "I remember him so well," she says of her late spouse. "He would tell me you need to keep going and keep this company going."
Ysassi's tale mirrors the mood of Las Vegas right now: Been down but clawing back. Small business owners are a bit more upbeat about the city's fortunes, and prognosticators more reserved, but after taking as bad a beating as any American city during the Great Recession, the Las Vegas thaw may finally be taking hold.
Many indicators are pointing up. Last week the state's department of employment reported Nevada's jobless rate is down, to 12.7% as of January, from a high of 14% in October 2010. (The number of Nevadans out of work is hovering at around 175,000.) Taxable sales are up, and hourly wages have have increased slightly. And the big numbers are up, too, when 2011 is compared to the 2010. Visitor volume hit 38.9 million, just shy of 2007's record peak. Average room rates are up almost 11% to $105.11. Room nights occupied are up 5.3%, and gaming revenue is up 3.5%.
"Many key Nevada economic indicators continue to move in positive territory and levels not seen since the start of the recession," says the state's chief economist, Bill Anderson, the author of the unemployment report. Still, local analysts are more apt to use words such as "fragile," "delicate" or "uneven" to describe the economy. Yes, it's better, they'll tell you, but keep things in perspective.
Like this: During the boom the local unemployment rate was 4% and job growth was an impressive 6% a year, four times the rate of national economy. There were 112,000 construction workers in June 2006, 12% of the total labor market. Now there's a mere 36,800 such jobs and frankly, a drive through town makes you wonder how there are that many: Las Vegas remains littered with the half-built carcasses of shopping centers, Strip resorts and mixed use developments.
And while the region added 11,800 non-construction, non municipal jobs, it still shed some 150,000 jobs. Brian Gordon, a principal with consulting firm Applied Analysis, says that the economy here will grow at a "slow and steady clip" through 2012, but expects that the unemployment rate will remain above 10% by the end of the year.