Tuesday, Dec. 15, 2009 | 2 a.m.
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Beyond the Sun
Lots of reports have noted the economic hammering suffered by Las Vegas and Phoenix — but who knew about Boise?
A report released today about the economically hard-hit Intermountain West makes two things clear: Smart metro areas better withstand downturns, and U.S. News and World Report’s fourth-best place to live in the nation, Idaho’s capital, is suffering almost as much as Las Vegas.
According to Brookings Mountain West initiative, a new research and policy partnership between the Brookings Institution and UNLV, the spud state’s most populous city joins Las Vegas and Phoenix as the three most troubled metropolitan areas within the region that includes Arizona, Nevada, Idaho, Colorado, New Mexico and Utah.
The shaky common ground that collapsed under the most troubled trio included fast-growing but “often speculative” real estate markets and the lack of multidimensional economic engines.
“The whole subprime, super-leveraged real estate play became a contagion that just exploded along the western edge of the mountain region,” said Mark Muro, research director of Brookings Mountain West and a director of policy for the Brookings Institution, a Washington, D.C.-based, nonprofit, public policy think tank.
Brookings has noted that the six states of the Intermountain West share many of the same challenges — and should be working together as a region.
Through its research, Brookings Mountain West hopes to “help the region understand itself,” Muro said. “The best regions know the most about themselves.”
Muro noted that while both Las Vegas and Boise were hit hard when the bottom fell out of real estate industry, they also suffered from a heavy reliance on certain economic industries.
For decades, the Las Vegas area fed off its growth. The boom of new neighborhoods, schools and businesses employed thousands of construction workers — who have now lost their jobs because growth has stopped.
Boise suffered because it similarly employed thousands of construction workers who benefited from the housing bubble. At the same time, one of its biggest employers, computer-chip maker Micron, has let go of about 3,500 people over two years. With about one-tenth the population of Clark County, that was a big blow for Boise.
“What it shows is that a metropolitan area can be diversified, but if it’s not diversified in the right areas, or if it’s entangled in a real estate bust, it will suffer,” Muro said of Boise, where the unemployment rate was 9.4 percent in September. Las Vegas’ was 13.9 percent in that month.
Cities such as Denver, with businesses focused on health care, health services, social services and education, haven’t suffered nearly as much as Boise, Las Vegas and Phoenix, he added.
David Eberle couldn’t find fault with what he heard of the Brookings study. The Boise city councilman is a professional economist who said more diversity is needed in Boise, but it will come as his city grows and matures.
“It’s lovely to say we could diversify in other areas, but we’re a fraction of the size of Denver and that will take time,” Eberle said. “We’re maturing and we would have preferred to have been more diverse. But I think we’ll also rebound faster than Denver and other areas because we’re smaller. We’re already seeing a bit of a turnaround.”
Muro suggested that cities with a more educated population were weathering the recession better than less educated areas.
“Bachelor’s degree attainment is an important indicator for economic health,” he said.
Denver has been called the “smartest” city in the United States, with roughly 36 percent of its residents having earned bachelor’s degrees. By comparison, about 21 percent of the Las Vegas Valley’s residents have earned such a degree, and about 28 percent in Boise.
“A lot of research has been done on economic resilience, and at least modestly high educational levels seem to correlate with the ability to redeploy and regroup,” Muro said.
Las Vegas fiscal analyst Guy Hobbs said Clark County’s reliance on growth to fuel its economy has been long known, and fretted over. Even so, various policy changes in recent years, such as the imposition of a real estate transfer tax, caused state and local governments to increasingly rely on growth for tax revenue, said Hobbs, who studied the tax structure for Gov. Jim Gibbons’ predecessor.
As for the need for an educated workforce, Hobbs said, that should be well known in the Las Vegas Valley.
“For years and years, everyone thought the state’s tax climate and its transportation accessibility would be very conducive to major corporations and light, clean industries moving here,” Hobbs said. “But the impediment for many years was the lack of the type of workforce they need for those jobs.”
And though most of the Brookings report is more of the pall that has hung over the county for at least a couple of years, it also noted a tiny ray of light: Las Vegas’ gross metropolitan product, a measure of economic activity, grew by 0.8 percent between the second and third quarters of this year, about the same as the national average.
“That could be a first sign of stabilization,” Muro said. “Employment won’t begin to grow until output begins to grow solidly.”
It’s an area that Brookings Mountain West will continue to keep an eye on, as this report was the first issue of “MountainMonitor,” and subsequent issues are to be released quarterly.