Las Vegas Sun

July 1, 2015

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ECONOMY:

Las Vegas population in decline; will it reverse?

Despite Nevada’s economic woes, some experts predict growth returning in coming years

70,000

The difference between Nevada’s population last year and this year, according to state demographer Jeff Hardcastle. Official numbers from the U.S. Census Bureau, which the Legislature will base redistricting on, will be released in December.

$1,026

Cost of renting a U-Haul truck in Las Vegas to drive to Dallas. (U-Haul rentals have largely been spared in the recession.) Renting a truck in Dallas to drive here, however, costs about half this amount because the company needs more trucks here.
Jeremy Aguero

Jeremy Aguero

An economic shock causes a city’s main industry to falter, and its residents flee in droves in search of work elsewhere.

We could be talking about Seattle and its “Boeing recession” after the collapse of aerospace in the ’70s, or Odessa, Texas, in the ’80s after the price of oil plunged.

And according to some recent estimates of the region’s demographics, we might soon be placing Las Vegas in the same category.

Jeff Hardcastle, the state’s demographer, estimates Nevada has 70,000 fewer residents since last year, including about 50,000 fewer in Clark County.

Just as in those other cities, the population loss is in some ways entirely predictable.

“People moved here for economic opportunity, so we expected them to leave when some of those opportunities ran out,” said Jeremy Aguero, principal of the consulting firm Applied Analysis.

One need only check the price of a U-Haul. Renting a moving truck to drive to Dallas, which has been to a large degree spared during this recession, will cost you $1,026. Renting one in Dallas to drive here costs roughly half that because the company needs more trucks in Las Vegas.

Here’s what has likely happened so far, as Las Vegas enters its fourth year of recession: Thousands of workers, who have been laid off or lost their homes to foreclosure, have left the state to return to families in the East, California or Latin America. A prodigious birthrate, however, has helped Nevada replace some of those who have left, such that our population is either down a bit, flat or perhaps even up a bit.

Nevada’s official population number via the U.S. Census Bureau, which the state Legislature will use to redraw congressional and legislative districts, will be released in December.

The medium- and long-term pictures of local population trends are much less clear. The Sun interviewed economists, demographers, urban planners and community officials. Some say we have a bleak future, lumping us in with a long line of cities, often in the industrial Midwest, whose sadness never seems to abate, veering from economic contraction to population loss and back again.

Others express optimism that things will turn around relatively quickly and/or that the population loss or stagnation could be used to our advantage.

Let’s start with the optimistic scenario.

Rob Lang, director of Brookings Mountain West, moved to Las Vegas last year and thinks the worst is behind us economically, and, thus, demographically. “I’m not a believer in the grimmest scenario,” he said.

Lang, whose expertise is in urban planning and policy, relies on the demographic forecasts of the Washington-based firm Woods & Poole Economics, which forecasts fairly robust population growth here, of about 40,000 per year in Clark County, through the middle part of the decade. Lang said he thinks that estimate is likely a tad high and that actual growth will be more like 25,000 per year, mostly coming from new births, especially among Hispanics.

That population growth won’t happen, however, if there’s also a massive wave of Nevadans leaving the state. If there are no jobs, no one will move here, and people already here will leave.

Lang thinks if they were to leave, they would have left by now or will in the near future.

Aguero said he’s been somewhat surprised that more people haven’t left. His survey data show people have stayed because they are locked in underwater mortgages; they’ve put down roots here, which is a fairly surprising development; or they’ve decided there’s nowhere else to go.

Lang thinks our economic prospects are better than many of the doomsayers realize.

He points to cities hit hard by the savings-and-loan crisis of the early 1990s, which was a debt-fueled commercial real estate bubble that burst and left cities such as Denver, Houston and Phoenix reeling.

When those cities suffered their real estate collapses and finally cleared away the debris — with the help of the government’s Resolution Trust Corp. — they had an advantage relative to other cities: cheap real estate.

Similarly, Nevada real estate is again a comparative bargain next to California. As California recovers, residents there who aren’t underwater will be happy to sell their homes and move to Las Vegas for something cheaper and bigger.

Lang also thinks economic seeds — some unrecognized — are waiting to spring to life.

He cites the potential for Interstate 11 to Phoenix; the development of high-speed rail to Victorville, Calif.; the new terminal at McCarran International Airport; continued development of renewable energy projects; expertise in green building fostered by the construction of CityCenter; and the opportunity for Las Vegas to become a center for specialized expertise in the global gaming business, as Houston is in energy and Los Angeles in entertainment.

Even with population loss, Lang and some demographers argue, there could be some upside in the form of short-term fiscal relief. The absconders are likely unemployed, a drain on the unemployment insurance fund and possibly social services, while contributing little in the way of tax revenue.

Compared with Rust Belt cities, such as Pittsburgh, during their massive population losses, Lang said, “We have a better hand dealt to us.”

Other analysts are less sanguine.

“Growth begets growth, and decline begets decline,” Aguero said.

Economists see the employment picture brightening in other states while remaining stagnant here, which is a recipe for flight. Unemployment in Las Vegas is 15 percent, but when workers who are involuntarily part time or who have quit looking are included, the figure is above 20 percent. Tourism has taken a hit, while the region’s other main industry, construction, has suffered a near-fatal blow.

“The other shoe probably hasn’t dropped quite yet,” said Jim Russell, a Denver-based geographer who specializes in migration trends and consults for economic development agencies. “It should get worse,” he said, referring to population decline.

The most obvious problem with population decline is reduced economic activity — fewer people in restaurants and stores, and, most crucially, fewer people to fill empty homes, warehouses and offices.

Other problems are less obvious. Chris Briem, an economist at the University of Pittsburgh who has studied his region’s population loss, pointed to the type of people who leave — young risk-takers — as being the very people needed to help transform an economy.

John Restrepo, an economics consultant and vice chairman of state government’s Economic Forum, said we shouldn’t be so sure that the people who have left are surplus construction tradesmen or unskilled tourism workers.

He said in the past 18 months, he’s come across maybe 100 educated professionals who have left town. Most are in the development industry, including engineers, bankers and lawyers. As for those who graduated from high school a decade ago and went on to elite colleges out of state — don’t expect to see them returning, he said.

It’s not clear that civic, business and political leaders are in the right mind-set for the painful decisions required to adjust to the change.

Briem said that in Pittsburgh during the 1980s, economic development specialists were too focused on the past and what is derisively called “smokestack chasing” — trying to bring back heavy industry that was gone forever.

Las Vegas is built around the growth model, with economic decisions based on the idea that another 100,000 people are on their way. Can we shake loose that mind-set, and build a new economic model?

Bill Flanagan, vice president of corporate relations for the parent organization of Pittsburgh’s chamber of commerce, said his city had to break the mind-set among its people that they could graduate from high school and get a good job at a mill.

“It changed the message: Suddenly, it was, you need an education and you need to get some skills,” he said. Pittsburgh now has one of the most resilient economies in America and one of the best educated work forces.

The talk here is of maintaining, at best, the state’s mediocre schools even as government inevitably shrinks to close the budget deficit.

Increasing educational attainment, which is one of the few surefire ways to bring economic diversity and innovation, is taking a back seat to other priorities.

“If the government can’t find the political will to address the problem of an educated workforce,” Russell said, “then you start looking like Detroit.”

Even the ever-optimistic Lang said Las Vegas needs to get it right and achieve some economic diversity before the next recession comes.

Restrepo was blunter: “The question I’ve been posing is this: Is the Las Vegas economic model broken? We know it worked very well for many years, but do we truly need to reinvent ourselves? And do we have the political will to do it?”

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