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August 2, 2015

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J. Patrick Coolican:

Sorry, Romney — Nevada won’t see 6 percent unemployment by 2016

Nevada’s future depends on residents taking matters into their own hands

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Steve Marcus

Republican presidential candidate Mitt Romney speaks during a campaign rally at the Henderson Pavilion Tuesday, Oct. 23, 2012.

J. Patrick Coolican

J. Patrick Coolican

Mitt Romney should have learned his lesson from President Barack Obama and not made any promises about unemployment.

During a visit to Henderson on Tuesday, Romney said, “How about four years where at the end we get Nevada unemployment down to 6 percent or lower?”

Republicans have been hammering Obama for years because his economists forecast that unemployment would peak nationally at 8 percent even though it eventually reached 10 percent.

The Obama administration badly underestimated the damage from the financial crisis and the housing crash. Historically, a financial crisis like the one we had in 2008 and 2009 leads to a deeper recession and a slower recovery because consumers, who make up 70 percent of our economy, are tapped out and paying down debt.

So now it’s Romney’s turn. Will he help Nevada get to 6 percent unemployment at the end of his first term?

“Nevada isn’t getting to 6 percent in 2016. It’s just not,” said UNLV economist Bill Robinson.

Anyone who has lived through the boom and bust here knows why.

As UNR economist Elliott Parker said, “We weren’t just the victim of a housing bubble, but we were actually a bubble economy.”

During the boom, we had twice as many construction workers as a percentage of our total workforce as the national average.

“We were set up to benefit more from the housing boom than most places, and as result, we were set to fall further,” Robinson said.

His ballpark estimate is that half our unemployment can be attributed to the depression in the construction sector.

Robinson notes that people moved here because there was a perception that there were plenty good-paying jobs. That migration, in turn, created demand for construction. But there was another factor: naked speculation. “There was no real basis for that construction employment,” Robinson said. “They were employed out of a speculative rush. People came to town and needed a house and bought four because they figured they could turn them.”

So, given that there no longer are plentiful jobs to draw people here, and given that the speculative rush is finished, construction demand will never return to what it was.

And without a construction boom, our unemployment rate will remain high, certainly above 6 percent. (Unless, as Parker said, the unemployed pick up and move. But out-migration is never a positive economic development — just ask Cleveland.) The only other way to get to 6 percent unemployment would be another housing bubble, and we’ll pass on that option.

“There’s nothing that’s going to pull those construction jobs back,” Robinson said. “The economy has to shift.”

Indeed it does.

Romney’s plan to reduce taxes and limit regulation would seem to be an attempt to get the economy going by improving the business climate.

As Parker points out, however, if low taxes and light regulation were really the key to rapid economic growth and low unemployment, Nevada would already be there. We have no corporate or individual income tax and relatively light regulation, especially compared with other states such as California.

I don’t blame Romney for not knowing anything about the local economy; local elected officials don’t seem to know much about it either. Really, we should thank Romney because he’s just reminded us once more that Nevada’s future won’t be decided by whomever occupies the White House.

It’s mostly in our hands and our hands alone.

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