Two years ago in this space, as the pandemic was starting to hit the Las Vegas economy disproportionately hard, I recounted the utter failure of the area’s movers-and-shakers to diversify the economy. Despite years of big talk, especially in the devastating aftermath of the 2007-2009 Great Recession, I cited a lot of data to suggest the Vegas economy had continued its boom-or-bust reliance on the one-trick pony of gambling/hospitality/live entertainment.
With the pandemic easing–maybe–the big talkers are again saying that now is the time for the Las Vegas to diversity for a sustainable future. ““Our recovery does not necessarily come from rebound, but from rebalancing,” Michael Brown, executive director of the Nevada Governor’s Office of Economic Development, recently told a session of the grandly named Las Vegas Global Economic Alliance. “Rebalancing will build the resiliency that we need in the Nevada economy going forward.”
But in my New to Las Vegas view, if local history is any guide, significant diversification ain’t gonna happen anytime soon. It’s simply a lot easier to stick to what you know best–here, quickly separating visitors from their money–than it is to strike out in a totally new direction involving, say, more better jobs for the locals.
And it’s sort of by a design that goes back to near the advent of legalized gambling–and quickie marriage and divorce–in 1931. The official policy long has been to do little to encourage economic development outside of this core. You don’t have to take my word for this. “Nevada must be kept small; let industry go elsewhere,” political kingmaker Norman Biltz, famously known as the “Duke of Nevada,” was quoted as saying in The Green Felt Jungle, the best-selling 1963 book about Las Vegas mob corruption by Ed Reid and Ovid Demaris. “Large industrial payrolls bring in large families, which cost more money in taxes for public services.”
Nearly six decades later, Nevada remains a minimal tax, minimal government state, with poor public schools and inadequate health care to show for it.
Underscoring this, the recently released new annual economic study by the Milken Institute of the U.S. “Best-Performing Cities” makes very clear that Las Vegas is anything but. On a list of 200 large metro areas, Las Vegas fell from a heady No. 23 in 2018 to No. 149 (a numerically lower rank is better), just outside the bottom quarter. Most of the drop came in the last year alone (from No. 88 to No. 149), one of the biggest falls on the list. This is not surprising, as few economies in the U.S. remain more dependent on a lack of social distancing than Las Vegas. The area now sits considerably behind such exciting large metros as Dayton, Ohio; Wichita, Kan.; Gulfport, Miss.; and Bakersfield, Calif.
Within Nevada, according to the Milken report, doing a lot better than Las Vegas is Reno, at No. 20, and, on the separate 201-long small metros list, Carson City at No. 76. While both have fallen, neither is nearly as dependent on the gambling/hospitality/live entertainment sector. With a smaller economy to start with and, perhaps, fewer big egos, Reno has worked somewhat successfully at getting a piece of Silicon Valley prosperity and diversification sitting just a four-hour drive away.
The methodology of the Milken study, which is somewhat forward-looking, overweights the role of technology in an economy while measuring historic and short-term wage growth. None of these factors does Las Vegas any favors, nor bodes especially well for the immediate future.
Right now the unemployment rate in Las Vegas is about 5%. While that’s way down from the gut-wrenching 31% rate recording in April 2020, the first full month after the pandemic hit, it’s still almost 40% higher than the latest national unemployment rate of 3.6%. In February 2020, a month before the pandemic’s start, Las Vegas unemployment dipped to 3.5%. So Vegas still has a way to go, especially considering the unemployment rates don’t count folks who have stopped looking for work, a factor that means the current situation is probably even worse than 5.0%.
But I digress. It’s the lack of meaningful economic diversification I want to focus on. For data I’m using official workforce numbers from the U.S. Bureau of Labor Statistics for three time periods: January 2008, as the Great Recession was getting underway; January 2020, just before the pandemic; and March 2022, the most recent time frame available.
What little economic diversification that has taken place in the past 14 years is mainly due to hits taken by the leisure and hospitality sector–that’s where the Strip and gambling stuff is–than any grand plan of bulking up elsewhere. And in Las Vegas it’s the leisure and hospitality sector that brings in the big bucks from elsewhere. The other sectors largely just recycle what’s come in. Call this diversification by default.
In January 2008, 271,000 folks, or 29.5% of the Las Vegas non-farm workforce of 919,700, labored in leisure and hospitality. Twelve years later in January 2020, the L&H body count rose to 289,600 of 1,034,000 total workers, but the percent dropped a tad to 28.0%. Two years later in March 2022, the body count in leisure/hospitality was down to 267,700 but the total work force had moved up to 1,040,500. That sector’s percent fell to 25.7%, but far higher than all other sectors.
So who gained? Not manufacturing, a pillar of many other regional economies, where the minuscule 2.6% body count (26,900 jobs) in March 2022 was less than the 2.8% calculated in 2008. Nor higher-paid information technology, the purported growth sector of the future, where the even tinier 1.1% share (11,500 jobs) in March 2022 was below the 1.2% measured in 2008. Nor even hated government, where the 10.1% cut (105,600 jobs) was below the 10.7% in 2008.
Rather, the biggest percent boosts came in odd places that mainly reflect money already here. Education/health services rose from 7.0% in 2008 to 10.6% (110,700 jobs) in 2022, even though national studies in these categories rank the Las Vegas area very poorly. Professional and business services (all those lawyer billboards?) jumped from 12.6% in 2008 to 15.1% (157,100 jobs). Trade/transportation/utilities rose from 17.7% in 2008 to 19.6% (203,900 jobs).
Want another animal analogy about Las Vegas? There’s that saying about the difficulty in teaching an old dog a new trick. Woof!