Justin M. Bowen / File photo
Published Tuesday, Nov. 30, 2010 | 7 a.m.
Updated Wednesday, Dec. 1, 2010 | 1:39 a.m.
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Beyond the Sun
During the years when the global economy and real estate markets were overheating, Las Vegas surged as one of the hottest economies among the world’s largest metropolitan cities, on the strength of the construction and gaming industries.
That was then, and this is now: a bruising tumble toward the bottom.
Las Vegas’ economic performance is fifth-worst among 150 metropolitan areas around the world, and the prospects for a rapid recovery are dim with its dependence on domestic tourism and construction, according to the author of a report released this week.
Before the recession, in measurements analyzing 1993 through 2007, Las Vegas ranked No. 14 in the world among 150 metropolitan areas studied by the Brookings Institution and London School of Economics.
Las Vegas fell to 128th in the rankings during the recession in 2008 and 2009, and since the recovery has begun, its ranking has fallen to 146th. That’s better than only Dublin, Ireland (150); Dubai (149); Barcelona, Spain (148); and Thessaloniki, Greece (147).
The report said the patchy recovery that took hold in most U.S. cities in 2009 and 2010 hasn’t played out in Las Vegas. The area’s income levels declined 1.2 percent during that time despite an increase nationally, and the employment rate dipped 3 percent, much greater than the national decline of 0.7 percent.
The report also cited Las Vegas’ foreclosure problem with the second-highest share of bank-owned homes in the country and more than two-thirds of residential mortgage holders owing more than their homes are worth.
“If the first year (of recovery) is any indication for Las Vegas, it could be a long, slow road ahead with the overhang from a damaged real estate market,” Alan Berube, senior fellow and research director at Brookings Metropolitan Policy Program, told the Sun. “It’s going to take time to sort through that.”
For a decade and a half before the Great Recession, Las Vegas added jobs at a
4.9 percent annual pace with booming construction, real estate and gaming industries. Nationally, Las Vegas was ranked No. 1 and the closest was Phoenix, ranked 20th globally.
The city’s decline was like that of economies in Eastern Europe — “a house of cards,” Berube said. The rankings measure jobs, job growth and income — all categories that have taken hits with a current jobless rate of 14.1 percent, Berube said.
“It was globally one of the fastest-growing regions leading up to the recession and sort of the Dublin of the Rocky Mountain West,” Berube said. “It was mentioned up there with some of the Eastern European cities that were highfliers up until the crash because they found themselves heavily over-invested in real estate. They had a significant portion of their economies in construction and real estate finance, and the jobs went poof when the housing bubble burst worldwide.”
The ranking has tumbled even further since the global recovery started in 2009 because other metropolitan areas made up ground on Southern Nevada, whose economy has improved little by comparison, he said. Phoenix, for example, fell from 20 to 114 during the recession, but has since rebounded to a ranking of 68.
“The economy that Las Vegas had before the recession is not a recipe for growth in the new economy,” Berube said. “There has been talk about the need to diversify and find new sources of economic growth, and that is imperative in the long run.”
The strongest growth during the recovery has taken place in more highly educated regions such as Washington, D.C.; Minneapolis; Austin, Texas; and San Francisco, Berube said. Highly educated people tend to work in industries that aren’t as affected, and if they get displaced, they have an easier time shifting to new jobs than those less skilled and educated, he said.
The report cited the importance of existing public and private centers of innovation, such as the Solar Solutions and Advanced Clinical Training and Research centers at UNLV. Las Vegas is “out of the starting gate, but it has a lot of work to do” to take advantage of its opportunities and build from its strengths, Berube said.
The report mentioned that raising Las Vegas’ low rate of college degrees from
22 percent of adults would be crucial in helping diversify the economy.
“It’s going to be a tougher transition for your economy,” Berube said. “It’s the chicken and the egg (scenario). You need the education to build a workforce, but you have to make investments to attract those workers.” As for its gaming and tourism sectors, Berube said Las Vegas is the most consumption-dependent economy in the nation with its large number of jobs in hospitality, retail and housing. But national recovery will remain weak for an extended period, Berube said.
“The betting man would say if you’re expecting the U.S. economy to rebound in a way that’s going to lead to a quick, strong rebound in Las Vegas, you probably better place your bets elsewhere,” Berube said. “It’s going to be a while and this is an opportunity to rethink the growth model. What got Las Vegas to where it was in 2006 is not what will get it to a better place by 2020.”
The growth is in emerging economies of China, India and Latin American countries. Las Vegas needs to focus on economies where the middle class is growing, he said.
“That’s creating opportunities for new demand than U.S. and European cities can produce,” Berube said. “Tourism is one of those things that is exported, and the question is: How do you position that industry for a period of demand not coming from the U.S. but other parts of the world?”
Before the recession, Shenzhen, China, was ranked No. 1 followed by Dubai in the United Arab Emirates. During the recovery, Istanbul, Turkey is ranked No. 1, followed by Shenzhen; Lima, Peru; Singapore; and Santiago, Chile.