Diversification? It’s made major strides in last decade, analyst says

Diversify Nevada?

It's been happening, unheralded, for years, says one local economic analyst.

For all the hand-wringing about how to expand the state's commercial base, diversification has made big strides here in the last decade, said Jeremy Aguero, a principal in local fiscal-research firm Applied Analysis.

And while business leaders and policy makers must boost diversification even more in a state where 20 percent of people work in hotel-casinos, Nevadans should think twice about overstating the need to overhaul the state's tourism-heavy employment distribution. It's worked well for the most part, Aguero said in a Thursday presentation at the Four Seasons for 200 members of the Nevada Development Authority.

"We have to be very, very cautious about changing some of these things," he said. "Frankly, we don't want to look like the national (industry-concentration) averages. We don't want to be everybody else. I've been to Des Moines, all right? I don't want to go back. I've been to Bakersfield, Sarasota, Detroit; I'm not interested. But that doesn't mean there aren't things we can't do better."

To understand what the state could do better, start with how it's diversified.

Nevada led the nation in diversification from 2000 to 2010, Aguero noted, with nine of every 10 new jobs in the decade coming from outside hotel-casinos.

Las Vegas is full of diversification success stories, from Allegiant Airlines to the Ultimate Fighting Championship to Zappos.com to solar-panel maker Amonix. And, as the state opened 45 new hotel-casinos in the period, 11,000 other businesses launched as well.

What's more, overall growth here would have been dramatically slower from 2000 to 2010 had Nevada's industry mix and growth rate been the same as the nation's, with fewer tourism jobs and a heavier concentration in trade and manufacturing. The Silver State created 88,100 net new jobs in the decade, while it would have formed just 20,900 jobs if it had reflected national averages.

"So there's something we are doing right," Aguero said.

Still, Nevada remains the third least-diversified region in America, after Wyoming and Washington, D.C.

Aguero said the state's narrow focus on leisure and hospitality -- it has three times the concentration of hospitality jobs as the rest of the nation -- does create cyclical problems during downturns. But he told the crowd that the state's problems are just that -- cyclical -- and not structural issues that require "burning down the economy and starting over."

"If it's cyclical, we need to wait it out and be smart about what we do next."

Strategies should be both short- and long-term, beginning with strengths.

In the short run, economic development should focus on cutting the local unemployment rate of 12.5 percent, Aguero said, (though it's under 8 percent if you remove construction workers from the mix, Aguero noted).

Adding jobs in already-strong sectors including tourism is one answer, but bringing in jobs from new industries is also important. He pointed to a November study from the Brookings Institution and SRI Institute calling for more businesses in health care, information technology, logistics and aerospace, among other fields.

State and local leaders should also concentrate on attracting high-growth occupations. In some fast-growing professions -- epidemiology, skin care, airfield operations and orthotics and prosthetics -- Nevada already has a bigger-than-average concentration to build on.

High-growth jobs with lower penetration here, including doctors and surgeons, interpreters and translators and financial analysts, are ripe for expansion.

Long-term, crafting a resilient economy will require introspection, Aguero said. Ask yourself: If you could choose to raise your family or send your kids to school anywhere in the nation, would you pick Las Vegas? With the state cutting more than $500 million out of its most recent K-12 education budget, are businesses not coming here because they don't know the city, or are they not coming here because they do know the city? And if we won't invest in the state, Aguero asked, how can we expect anyone else to do so?

The quality of education here matters because it's impossible to predict the future, Aguero said.

"We can focus on any industries or ideas, but we don't what tomorrow will bring. But it will stem from innovation. All we can do is train our students to be prepared."

In the long run, local diversification shouldn't be about trying to copy the economies of Denver, Seattle, Chicago, Miami or Dallas, Aguero concluded.

"These are economies that so many people think we covet, that we want to be. They've invested more in their communities than we have, and they're reaping the benefits of that. But they have their own sets of problems, and no matter how much we don't want to think about it, the grass is always greener on the other side. We don't need to completely recreate our economy. We have already reset economically. Economic development will look like us, not them."

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512.