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October 1, 2014

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Las Vegas economy among worst in the world, report says

City at No. 146 among 150 metro areas in study

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Justin M. Bowen / File photo

A new report shows mixed sentiments on the future of the Las Vegas economy.

Updated Wednesday, Dec. 1, 2010 | 1:39 a.m.

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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.

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  1. The future is bright for Las Vegas. Frankly, for those who don't see it that way, it's probably time to hit the road.

  2. Tell us something we don't already know, if the local economy is going to change, the casinos will have to give all the players a break, and make this city a friendly place for the players.
    That means for them to start to change the pay backs on all slot machines. To stop the harassment of table game players if they start to win. To get rid of 6-5 black jack, and to cut the cost of their food and entertainment!

    Just about ever state now has casinos, what are the casinos here doing to bring in new players?
    You need some winners for players to keep coming back, and that is not happening any more with all the Corp. Greed! Winners give it all back anyway, but when they do go home,and are asked if they won, they tell everybody that they had a great time and that they were a winner, to bad they didn't bring any of it back with them, and even if they did they will be back to lose it on their next trip!

    I hear the same thing from the out-of-town players I know, "We can't win any more in Vegas"!
    Have the CEO take a cut in their pay, and up the pay outs, then make the players feel like they are wanted!

    Unfortunately our economy is based on the casinos, and until they change we will be out of work.

    Greed is killing Vegas, the casinos suck every penny they can out of the players pockets, it's to the point where you might as well stick up your hands when walking into a casino, stopping at the doors, and just let them take everything out of your pockets.

    They have turned Vegas into a carnival, and all their games are just what you would expect to find in a carnival, you don't stand a chance of winning any more!

    They did one hell of a good job of training all their younger players not to gamble, when they started to build all family friendly casinos. They came to Vegas with their parents, and got to hear mon and dad every night arguing about dad losing all the money for the week they were here every time they came.
    That is way we have all the pools and clubs now these kids are not spending their money gambling!

    Dad lost for twenty years, mon scream at him every night they were here. Yes they did a great job of teaching Jr. of what not to do when in Vegas!

    Gambling built this City and bad gaming by the casinos will bury it!

  3. "Greed is killing Vegas"

    If by that, you mean the greed of the 1 million who moved here from 1994-2004 looking for an easy buck, maybe so. "Greed" built Las Vegas, on all sides of the equation, including the consumer, the home buyer, the individual investor, the entrepreneur, the casino operator... Without "greed" casinos would not exist at all because there would be no gamblers.

  4. I disagree on this article.
    Las Vegas economy still works, but the population is too high for it, resulting in current unemployment rate higher than usual.
    Due to the creation of many other gambling facilities world wide and tight markets, visitors do not necessarily come solely to Las Vegas anymore. Most people still like Las Vegas as the absolute and undisputed No 1 gaming destination world wide. However, Asian gamblers stay in Asia now, as Macau offers everything, if not more , to them, not only because there they can speak their own language and don't have to fly so many hours before they get there. This is a fact.

    Anyway, Las Vegas's economy of course does not only depend on Asian highrollers, so the situation is a bit tricky. Maybe it's also because more Indian reservations in the US are now offering the same gaming and comps and everything just like Vegas, and it's only a short drive rather than a hassleful flight for the gamblers. Could be another reason.
    Without any doubt, however, the locals' market in LV is under extrem pressure. Besides the "fixed income citizens (the retired people that get their pensions) and the millionaires that don't have to bother about losing some of their money regularly, a major percentage of players that used to visit the casinos regularly is currently "out of the action". They will find it harder to get into the action as they can only do so if there are new and more and better jobs available. This is probably the hardest part as the system can only function with "de-regulation", which is ..... reduction of the number of citizens. People looking for jobs and not finding anything in Vegas should maybe consider moving out for a few years and finding their luck elsewhere. As the US economy seems to improve slightly better than in other countries, there must be chances for everybody seriously looking for something. You just can't hope that you will get hired on the Strip for some minimum wage job if there are not enough new visitors flocking in. That's the cold fact.
    But, I still think that the Vegas economy is definetely not worse than in many other countries of the world. It only has too many people looking for the easy jobs that are no longer available.

    From Switzerland

  5. "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 a new job than someone who's less skilled and educated, he said."

    This paragraph speaks volumes.

  6. For years aspects of the impending demise of Las Vegas - often seen as the result of too much growth - has been debated, rejected, or agreed to since 1989. That was the year when Steve Wynn built the fabulous, and biggest, hotel in Las Vegas: The Mirage - and it was a success.

    However, WHAT FOLLOWED WAS - the building of many more (and much larger) new HOTELS AND CASINOS, an insatiable hunger for NEW HOME construction, and the building of new sky-scraper CONDO's - which now clutter THE STRIP on every available tract next to expanding an HOTEL/CASINO.

    Many people saw this unimpeded, ill-planned, growth as being too much, and without the tourist or gambler base to support it. GREED became the focus of business decisions for growth - rather than "responsible planning," limitations on "ccupancy-per-sq-ft," accessability to draw customers, - and other "code" or essential considerations typically mandated in planning design and construction.

    To ensure higher profitability, prices were raised on food, entertainment, hotel rooms, etc. - and the odds were adjusted on gambling games and slots to favor casinos (which lowered the "win" for tourists; and they noticed it).

    All of this LUST FOR GROWTH was championed by organizations such as, the Las Vegas Chamber of Commerce - who in the mid 1990's avocated a growth-oriented philosophy with a "battle-cry" of: "BUILD IT AND THEY WILL COME!"

    Well, Las Vegas HAS built "it." And the current SUPREME EXAMPLE OF GREED is CITYCENTER - an $8.5 BILLION dollar complex of 21 buildings that almost went bankrupt due to insufficient funding, lack of interest in ownership, and many design and construction proglems. This property is now an MGM momument to greed - built largly with (foreign) Arabian money, and something of an ill-designed "White Elephant."

    CityCenter would probably make even Bugsy Siegel cringe with apprehension, as to the viability of such an extremely large complex - with virtually NO WALK-BY ACCESS to the casino (see current LV SUN article). Such access has ALWAYS been seen as a mandate for the success of any casino.

    Well now, the-proof-is-in-the-pudding. It is obvious that the economic meltdown was caused by the sub-prime mortgage debacle - the decade-long growth in Las Vegas can now be seen as contributing to, and the proximate cause for, the poor economy, and millions of fewer tourists now visiting Las Vegas. We have "built it" - but "they are no longer coming" - at least for the foreseeable future.

    And it can be debated as to whether anything resembling the current financial losses would have occurred eventually anyway (at least to some degree) - it is certain that such rampant growth has now left Las Vegas in a economic disaster (as noted by the LV Sun) that will take something of a miracle to recover from.

  7. And t accept this award for being one of the worst in the world, will be Nevada's savior, Harry Reid.

    In his acceptance speech, he will thank his long time supporters: The Unions, Wall Street bankers and of course the school district leadership for their continued insistence on hiring seat warmers for superintendents.. Making our schools spew out uneducated future welfare recipients.

    .

  8. I have to agree with SamB007 concerning Las Vegas casino management, I think they are being short-sighted in trying to make up for lost revenue by changing rules on table games in favor of the house (e.g. 6/5 blackjack), more rake, less payout and the imposition of hidden (resort) fees, along with the cutting of costs by providing less service and amenities, fewer comps, etc. Time will tell if that strategy works out for them. I can see why they went in that direction, it's the "safe" way out. I think they are thinking, let me stop the bleeding and maybe the economy will improve, convention business will pick up and we'll limp along until we can recover. If you look at MGM and Harrahs, both are up to their eyeballs in debt, the corporate credit card while not maxed out, is getting there. Harrahs debt is approximately 20 billion and MGM, I haven't checked recently but I believe its up there around 15 billion. The debt service on this debt is huge and they have to roll it over periodically, as well as either meet or get waivers on various debt covenants that are in place. As to Boris's point about the Las Vegas economy still working and having a population that is "too large", I agree to a certain extent, but where are these people going to go? It's a complex situation. You have people who are from Las Vegas that have family there and have lived there all their lives. When I go back to my hometown in New York I run into people from high school who never left except for maybe an occasional brief vacation to Florida. That's the mentality you're running up against. Then you have the people who came during the boom years and were working in construction or real estate related occupations who are either tapped out or on extended unemployment, food stamps, etc. who either won't leave or can't afford to leave. Some of these people are doubling up, moved back in with relatives etc., some of whom are content with their situation, some attempting to hang on until retirement and social security kick in. Then you have to ask yourself with the graduation rate from high school in Nevada at less than 50%, graduation rate from college around 22%, even if they moved elsewhere----where are (especially those without a college education) they going to work? Even if they moved to an area with low unemployment, e.g. Sioux Falls, South Dakota or Omaha, Nebraska, to name just a couple of places with low unemployment, they would in all likelihood struggle to find employment because they are lacking the necessary education and skills. It's a mess and It's going to be along time before Las Vegas turns around. The education system must be fixed, that's for sure.

  9. One might be excused for thinking that with all these excesses in labor for medium to no skill that with Nevada spending 1 billion per year, 2 billion per budget on illegal alliens that REAL Nevada leaders would do what Pres. Truman and Pres. Eisenhower did in removing illegal alliens from America to give jobs to citizens both after WW11 and Korea. Look it up ; google "operation wetback"

  10. There is one group of people being overlooked that could have a major influence: those who can work from home and telecommute to jobs in other states.

    For those people, Las Vegas is a great place to be right now. Low housing costs, decent cost of living, and very good network connectivity.

    Public schools can be a problem, but being picky about where you live can help with that.

    It really is hard to beat the LV area for a telecommuter right now.

  11. that's it, I am moving to Pyongyang
    and I would send a postcard, but I don't think they have postcards in Pyongyang
    Naturally I would prefer Mogadishu for the weather, but something about Somalia, the food perhaps, keeps me away. Pirates be gone!

  12. Boris is correct; Las Vegas is overpopulated for the number of annual visitors we have. We need to be in the range of 23 annual visitors per permanent resident to be healthy and we are nowhere near that.

    Las Vegas needs to shed 300,000 residents or attract 42 million annual visitors.

    http://bit.ly/b8EURc

  13. Poor stevem...
    How sad must it be to hide behind such shallowness???

  14. One only has to look at the shortcuts that Harrah's Entertainment Inc. took from the mid 1990's to the end of 2007 when they did the bulk of their illegal remodels which left every single room that they touched unsafe for the public to stay in...every single room! And adding insult to injury Harrah's also exposed tens of thousands of their construction workers, hotel employees and hotel guests to ASBESTOS, a known carcinogenic...INTENTIONALLY! Harrah's knew that the ASBESTOS was present, they knew the law but they decided that they were above the law and knew that the Agencies in place to protect such things from happening were in their pocket. Who gave Harrah's the keys to our city? When did it become okay for the largest Gaming Company in the World to intentionally provide "public fire safety traps" for their Guests to stay in and their employees to work in? It is not okay that Harrah's decided to poison me, my fellow workers and hotel Guests. ASBESTOS causes DEATH, not immediate death nor death tomorrow but Death years later none-the-less. Harrah's took a cold blooded calculated risk with our lives for their bottom line. They have had plenty of help trying to cover up their dirty little secrets from Government Agencies at all levels and Public Officials. Las Vegas does not stand a chance to survive if the CORRUPTION that has a strangle hold on it is not broken up for good! You can't tell me that it is not a crime for the largest Gaming Company to have knowingly & willfully provided unsafe rooms for the public and to have exposed all of us to a known carcinogenic again & again & again. All involved in this mess should be held accountable to the full extent of the law.

  15. I can appeciate optimizm but reality and history should remind us things can get much worst. As I have said since 55% of the morons in the state voted for Reid. I hope you all have a great stable and high paying jobs. Otherwise you deserved to have your Reided-unemployment checks cut(he let you have it for one more week after elections). At least Sharron Angle would have had no power. So stop your whining and take action!