Nevada employment: First to worst

Jeremy Aguero

Friday, Aug. 6, 2010 | 3 a.m.

Nevada’s unemployment rate – 14.2 percent – now ranks atop the nation. Although a somewhat imperfect indicator of a state’s economic health, it stands as an ever-present reminder of just how hard Nevada has been hit by the recession.

For most analysts, it is not the unemployment rate, but rather, actual employment, that is the more meaningful statistic. After leading the nation in employment growth for most of the past two decades, Nevada has actually shed jobs during each of the past 27 months. On average, the state’s employment base shrunk by 3,340 positions between March 2008 and June 2010, resulting in a combined loss of just over 90,000 jobs, or 7.1 percent of our 1.26 million peak employment figure. In sharp contrast to the nation-leading rates of employment growth reported during the first half of the decade, Nevada’s rate of job losses from 2008 to 2010 is also nation-leading.

Perhaps the most ominous of the employment statistics is that of the state’s labor force. The labor force includes both people with jobs and those that are looking for work. Nevada’s labor force is estimated at 1.37 million people, 31,000 or 2.3 percent higher than the total reported when the state last reported adding jobs (March 2008).

Economic opportunity has long been the primary motivation for population migration into Nevada, with the conventional wisdom being that when job opportunities ceased to exist many of those workers would leave the state. Had the state’s job losses been accompanied by population emigration, the state’s unemployment rate would be approximately 8.1 percent, below the national average and 22nd among the 50 states and the District of Columbia.

Substantially fewer than expected people actually left. Many newcomers had been in Nevada long enough to put down roots, found themselves tethered to an underwater home or were simply unable to find a better opportunity elsewhere as every state reported job losses in 2009. The result is 193,600 Nevadans actively seeking employment, a figure that has risen 167 percent since job losses began piling up in the second quarter of 2008.

For many, Nevada’s economic turbulence has turned into something of a waiting game, with businesses and employees optimistic that a national economic recovery will soon buoy the state’s economy and get us back on track. What is more important than the boom from 2000 to 2007 or the bust from 2007 to 2010, is what happened after both extremes have been washed out. Including both the boom and the bust (i.e., 2000 to 2010), Nevada has created a net 159,000 jobs during the past decade, translating into an annual rate of employment growth of 1.5 percent. Although anemic by Nevada standards, that 1.5 percent rate of growth is well above the national average (0.2 percent) and the Western states’ average (0.03 percent) and similar to other fast-growing economies such as those in Arizona (1.8 percent), Florida (0.8 percent), Texas (1.2 percent), Utah (1.3 percent) and Washington (1.1 percent).

The reality is that most of the employment growth Nevada has lost is growth that other states never had in the first place. Moreover, many of these jobs were predicated on growth itself (consider the construction workers whose job it was to build homes for other construction workers). The likelihood that Nevada will see resurgence on par with boom-year growth, or even single-digit unemployment, during the next five years is highly unlikely.

The solution will be to refocus Nevada’s economic development efforts. Today, the state spends roughly $5 million per year on economic development programs, while spending more than $28 million per week on unemployment insurance claims. Although we do expect an increasing rate of population out-migration as underemployed households default on their mortgages and look to start over in areas with better job prospects, many of the 194,000 people actively seeking work will stay in Nevada. We are either going to pay to find them jobs, or pay them to be unemployed.