Las Vegas is back near the top for job growth, though two new reports have thrown some cold water on a hot recovery.
With local and national numbers on economic output heading south, Southern Nevada’s burgeoning jobs market could struggle to keep up its gains. And if growth doesn’t pick up in coming quarters, that could leave the region stranded below peak employment.
To understand what lies ahead for local job growth, consider how far the market has come.
After landing among the top markets for job loss in 2010 and 2011, Las Vegas ranked No. 3 in employment growth in the first quarter, at 1.4 percent, according to think-tank Brookings Mountain West’s Mountain Monitor report released Wednesday. The city came in behind only Grand Rapids, Mich., and Akron, Ohio, where a resurgent U.S. manufacturing industry is lifting jobs.
But unlike in other markets, local job growth didn’t lead to improved economic output. The area’s production was flat in the first quarter, after jumping half a percentage point in the fourth quarter.
The output figure is “certainly a weakness in a now otherwise fairly solid recovery,” said Mark Muro, a senior fellow and policy director with Brookings and coauthor of the Mountain Monitor.
A couple of factors may have driven down output.
For one thing, Las Vegas has a service economy rather than a manufacturing-based economy. When you’re not building value-added products — new goods made of raw materials — it’s easier to add jobs without seeing a corresponding jump in economic output, Muro said.
A shrinking U.S. economy could also be hurting Southern Nevada. The country’s gross domestic product fell 2.9 percent in the first quarter, well above early estimates and the worst decline in half a decade, the Commerce Department said Wednesday.
“The Las Vegas economy can’t be separated from the national economy, especially given its dependency on tourism and gaming,” Muro said. “To the extent the region is dependent on economic vibrancy elsewhere, it does make you somewhat vulnerable. The national dip is just another sign of how difficult it’s been to find a trustworthy economy. Your region is susceptible to what happens elsewhere.”
Economists debate why the national economy slumped so steeply in the quarter. The harshest winter in decades in the Midwest and Northeast may have kept a lid on consumer spending, but the nation also has “clear challenges” with its labor force, Muro said. Those obstacles include a relatively high number of long-term unemployed, and mismatches between the labor pool’s skills and the demands of today’s jobs.
“We have variable performance on a lot of indicators, we’ve seen a relatively slow recovery, and we have a huge deficit of jobs, given the growth of the population,” Muro said.
Those long-term issues could hurt Southern Nevada’s recovery because the area relies so much on national and international consumption. There’s really only one way to fix that dependency, and it won’t come overnight.
“Ultimately, you’ll need to build some kind of value-added trading sector to balance this ephemeral consumption economy,” Muro said.
That will mean attracting or creating new jobs in manufacturing, information-technology development, health sciences and other innovation-centered industries — something state and local economic-development agencies say they’re working on.
Las Vegas was still 6 percent below its peak jobs base in the first quarter, according to Brookings. But if the city can sort out its long-term issues, it’s primed for growth, experts said.
The region certainly had a lot going for it in the Brookings report. It was the only major metro area in the Intermountain West that posted quarterly job growth of more than 1 percent. Its jobless rate finally dipped below 9 percent. House prices rose 2.9 percent in the quarter, besting all other regional cities but easing off of an unsustainable 5.9 percent spike in the fourth quarter.
Steve Brown, director of UNLV’s Center for Business and Economic Research, said improvements in taxable sales and record local visitor volume in March point to continued economic recovery. Also, most indicators — including oil prices, trends in unemployment and the U.S. Index of Leading Economic Indicators — point away from another national recession.
“If (first-quarter GDP numbers) are really a one-time phenomenon, and what we see was basically a little bit of lost output in the first quarter with the economy bouncing back to where it was headed without the bad weather, then the impact on people visiting Las Vegas will probably be pretty negligible,” he said.
Muro agreed that Southern Nevada’s fundamentals look relatively healthy.
“We’re seeing several quarters of the right momentum, and solid progress in a variety of indicators. So I think it’s a picture of normalization and a more sustainable recovery at last, though with this question of output.”
Contact reporter Jennifer Robison at email@example.com. Follow @J_Robison1 on Twitter.