Study predicts Vegas rebound through 2004

David Strow

Friday, Jan. 11, 2002 | 11:10 a.m.

Echoing previous reports, a study Thursday said Las Vegas' job creation engine has seen the greatest slowdown of any metropolitan area in the country as a direct result of Sept. 11.

But the news isn't all bad. The analysis, conducted by the Milken Institute of Los Angeles, predicts the pattern of rapid job growth Las Vegas enjoyed over the past decade will have almost completely returned by 2004.

The Milken Institute study ranked metropolitan areas by the difference between their expected job creation or losses, post-Sept. 11, and what those projections were before Sept. 11.

The Milken Institute is projecting that by the end of the year, Las Vegas will have 5 percent fewer jobs -- 41,000 -- than it otherwise would have had if there had been no terrorism.

Perry Wong, an economist with the Milken Institute, stressed that this doesn't mean 41,000 Las Vegans are expected to lose their jobs in 2002. The number, he said, is a combination of layoffs and expected new jobs that won't be created as a result of Sept. 11 and the economic slowdown.

The institute had projected the Las Vegas job market would have grown 3.8 percent by the end of 2002, absent the attacks of Sept. 11. Instead, the Las Vegas economy is expected to shrink slightly in 2002 under the new projections.

In percentage terms, Las Vegas' loss of actual and potential jobs is the worst in the country.

This finding is similar to other studies in recent months. In early October, the New York Times reported that the Las Vegas economy was expected to be the worst hit of any metro area in the United States, as the area's rapid economic growth evaporated. The New York Times study was conducted by Economy.com, a Pennsylvania economic forecasting firm.

And the University of Nevada, Las Vegas' Center for Business and Economic Research reported in December that the Las Vegas job market was likely to shrink by 0.6 percent in 2002, compared to expectations of 4.9 percent growth made in July 2001.

"It (the Milken study) is pretty much the same forecast," said Mary Riddel, associate director of UNLV's Center for Business and Economic Research. "It will be bumpy, but most of the job losses have already occurred. We're just not going to see a lot of job creation."

The severity of the slowdown is a result of the Las Vegas economy's concentration in travel and tourism. The Las Vegas economy is 16 times as dependent on travel and tourism jobs than the average U.S. metro area -- and sectors such as restaurants, bars, hotels and recreation services are being hurt the worst by Sept. 11 and its aftermath, the Milken study said.

"With its large gambling industry and related infrastructure primarily accessible by air, Las Vegas is the single most vulnerable metropolitan economy," the study said.

The 41,000 fewer jobs is the fourth-highest total in the nation, trailing only New York, Los Angeles and Chicago.

Layoffs are likely to continue through the first quarter in Las Vegas, Wong said, but he expects that rehiring will begin by the second quarter as the national economy and the tourism industry begin to recover.

By 2003, Las Vegas will be off its pre-Sept. 11 projected pace by 20,750 jobs, or 2.4 percent. By 2004, the difference between the two projections will be 7,000 jobs, or less than 1 percent.

"By the time we move to the end of the year (2002), we start to see the (Las Vegas) economy create new jobs," Wong said. "By the time we get to 2003, the situation improves by a lot, and by 2004, we are going back on track. We pretty much get back to normal, if that's a word we can use."

However, there's a lot more to Las Vegas' outlook than an economic model can predict, Wong admits. A lot of the city's ability to recover depends on whether air travelers are willing to put up with delays at airports and security concerns, Wong said.

"Part of economics is about the psychology of people," Wong said. "Las Vegas is truly a city totally reliant on the mood of people, and we don't know how people (will react)."

The UNLV center has not made projections out as far as the Milken study, Riddel said, since a single new casino project can cause huge swings in the job market. But in general, Las Vegas should benefit if the national economy begins recovery in mid-2002 as expected.

"We're not so brave with forecasting, especially out here," Riddel said.