Mobility bust bad for Vegas

By J. Patrick Coolican

Saturday, Dec. 12, 2009 | 2 a.m.

I hate Cleveland. I’m moving to Vegas.

This sentiment is the story of Las Vegas’ growth and prosperity for decades, all the way back to the building of the Flamingo after World War II.

Las Vegas had fewer than 50,000 people in 1950 and is now home to about 2 million souls, nearly all of them transplants, a trend accelerated during the past two decades when 1.2 million people moved here.

“That’s a huge part of the (economic) growth of Las Vegas,” said Constant Tra, associate director of UNLV’s Center for Business and Economic Research. “They needed houses and retail and so on.”

Growth begot growth, and prosperity came with it.

Americans are staying put these days, however, and that’s a serious threat to Nevada’s fragile economy.

“Vegas is going to be disproportionately affected by the absolute crashing halt of interstate migration,” said Michael Hicks, director of the Center for Business and Economic Research at Ball State University.

About 4.7 million Americans moved from one state to another in 2007 and 2008, according to the Census Bureau. That’s just 55 percent of the total in 1999 and 2000. Geographers and economists think the number will plummet further this year.

As it happens, Las Vegas is in some ways responsible.

Las Vegas was the subprime mortgage crisis capital, and demographers and economists think the current inertia is caused in part by the plunge in property values that followed that crisis.

For about a quarter of all homeowners in the country, their homes are worth less than their mortgages — meaning they effectively have nothing to sell and are stuck where they are.

“People are underwater on their homes and that affects mobility,” said Isabel Sawhill, a Brookings Institution economist.

Recent data from the Bureau of Labor Statistics indicate there’s another reason people are staying put.

The data show a plunge in “quits.” Because of the shrunken job market, workers aren’t taking chances by quitting their jobs to explore others. They are grasping their jobs in bear hugs.

“People are anxious about whether they can get another job,” Sawhill said. “They’re thinking they better stick to the one they have in this very uncertain environment. You’ve heard of discouraged job seekers. These people are discouraged job holders,” she said.

Geographic mobility is what economists call “countercyclical.” When a recession hits, people usually move to where the jobs are. Job-related stasis — staying put in one’s job versus hitting the road in search of a better one — is unique to this recession.

The great population boom in Las Vegas in the past two decades began during the national recession of the early 1990s, for instance, and continued during the post-9/11 recession, because we had what much of the rest of the country didn’t: jobs.

This deluded many in Las Vegas into thinking the city was recession-proof. Not so much.

Hicks said this recession is different — people aren’t moving — because of “simultaneity”: The recession hit everywhere, and all at once. No place has jobs.

“There’s no place to run to,” he said.

He summed up the situation: “Combine all the people underwater on their homes with no jobs, and you get very little migration. It puts a hiatus on the type of migration that is so important for Vegas, South Florida and the Inland Empire” of Southern California.

Hicks noted that a sharp increase in migration would mitigate our housing crisis, as empty homes would get filled and the demand for housing would rise.

Of course, the reason people came here in the first place was usually for jobs, and there are no jobs, so there is no reason to move here.

Sawhill said Las Vegas should use this period of stagnation to think about the future and a diversified economy that will provide more sustainable prosperity. This means improving schools and building clean-energy facilities and transportation infrastructure, she said.

Without that reset, even if growth returns, “You’ll be overwhelmed with social problems,” she added.

The weather does beat Cleveland’s, though.