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June 2, 2015

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Report: Las Vegas’ recovery hurt by lack of education, diversification

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Leila Navidi

Nevada JobConnect on Maryland Parkway in Las Vegas. A new report finds that economic recovery in Las Vegas is hampered by a lack of educated workers and reliance on industries most vulnerable to the recession.

Las Vegas’ attempt to turn the corner on the recession has been made more difficult by a lack of educated workers coupled with reliance on industries most vulnerable to the recession.

That’s what can be drawn from a report issued by the Brookings Institution think tank in Washington. Brookings found that cities with the lowest unemployment rates tended to be those that have enough educated workers to fill available jobs along with industries that are either growing or more resistant to recession.

The report, co-authored by Brookings senior research analyst Jonathan Rothwell and think tank fellow and Research Director Alan Berube, grouped the nation’s 100 largest metro areas into four categories based on jobs and education data from December 2007 through December 2009. The Washington/Arlington/Alexandria metro area emerged on top with the healthiest mix of educated workers and industries most resilient to the recession. Other cities lower on the list either have a well-educated workforce and vulnerable industries or resilient businesses but less-educated workers.

Then there is Las Vegas, which tied for 84th and was mired in the bottom tier, along with cities such as Los Angeles; Riverside, Calif.; Phoenix; Detroit; Houston; and Dallas that have too few educated workers and too many vulnerable employers.

“These metro areas are not well positioned to recover unless national demand for what their industries produce rebounds significantly, and they may have to diversify into faster growing industries like health care, professional services and clean energy,” the authors wrote. “Moreover, regardless of national industry demand, above-average unemployment rates will tend to persist until they can either boost educational attainment or stimulate greater employer demand for less educated workers.”

Brookings reported that in 2007, 27 percent of Las Vegas’ workforce was concentrated in two “extremely fragile” industries: hotel accommodation and construction. Both industries were pummeled by the recession, leaving Las Vegas with double-digit unemployment and record foreclosure rates.

Of the nation’s top metros, only Riverside, Modesto and Stockton, Calif., had greater increases in their unemployment rate than Las Vegas from pre-recession lows through May. As of July, unemployment in Las Vegas was 14 percent, compared with 9.1 percent nationally.

The think tank ranked Las Vegas 55th in its ability to fill jobs with workers who possess the requisite education, an average score that Rothwell attributed to the fact that most jobs in the resort and construction industries don’t require advanced degrees. What dragged Las Vegas down in the study was the ability — or inability — of its key industries to create jobs. Those industries not only lost jobs during the recession but lost a higher percentage of them than was true nationally. The city ranked 94th in that category.

Brookings calculated that Las Vegas lost 38,140 construction jobs from the beginning of the recession in December 2007 through 2009. Building construction jobs fell 41 percent in Las Vegas versus 30.6 percent nationally; heavy construction and civil engineering jobs dropped by 35 percent locally compared with 17.6 percent nationwide, and jobs for specialty trade contractors declined by 36 percent versus 28.5 percent nationally.

The think tank also found that Las Vegas lost 17,000 resort industry jobs for a 9 percent decline, compared with a 5.8 percent drop nationwide.

“Las Vegas is a fascinating place because, before the recession, it enjoyed low unemployment and rapid job growth despite having a fairly less educated population,” Rothwell said. “But with the recession, it saw a sudden drop in demand for construction and tourism, which created a crisis in the metro area.”

Although not optimistic that Las Vegas will see its bad times reversed anytime soon, Rothwell said the metro area could try to offer more economic incentives, such as property tax breaks, to lure new businesses. He also recommended that the tourism industry step up advertising overseas to attract customers while the U.S. economy stalls. And he said the state should explore job training programs such as one in Louisiana, where the state pays to train a worker as long as a company guarantees a job for that individual.

Some economic problems are out of Las Vegas’ control, said Jeremy Aguero, a principal of the economic analysis firm Applied Analysis. He cited construction as an example because it relies on factors such as population growth and increasing demand for commercial buildings because of expansion of sales and manufacturing.

But Aguero said that in the push for economic diversification, Las Vegas shouldn’t ignore the tourism industry, which has shown that it can diversify on its own. The Ultimate Fighting Championship, a sport based in Las Vegas that has enjoyed enormous growth in recent years, is an example of how tourism can expand its reach, he said.

Aguero also stressed the need to support education as a way to strengthen the valley’s economy.

“There is no question that our education system in Southern Nevada is failing because of high dropout rates and low test scores,” Aguero said. “Southern Nevada students are falling behind, which will make them less marketable and means there will be fewer entrepreneurs.”

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