Report: Las Vegas needs to diversify export economy

Las Vegas has a bigger export economy than you might think, but the city needs to diversify its international profile or risk sustained slow growth.

That's the word from the Brookings Metropolitan Policy Program's Export Nation 2012, a new study that says economies that fare best in coming years will have a long overseas reach.

Exports increasingly hold the key to economic growth, said Mark Muro, a Brookings senior fellow.

Following the steepest and longest economic downturn since the Great Depression, domestic consumer spending slowed dramatically and shows no signs of rebounding to pre-recession levels. Meanwhile, most of the world's fastest-growing economies are outside the United States, in countries such as China, India and Brazil. So economic success for U.S. cities will depend on how well they're dialed in to international markets.

In some ways, Las Vegas is more dialed in than most.

The city ranked No. 21 among the nation's 100 biggest cities for number of jobs -- 43,700 -- directly linked to export production in 2010. Include indirect jobs, and it placed 28th. It came in at No. 36 for export value, which totaled $7.4 billion. And it ranked No. 12 for increases in export values from 2003 to 2008, when growth averaged 13.5 percent a year.

But Las Vegas ranked 72nd for exports' portion of metropolitan GDP, with an 8.4 percent share.

Plus, the lion's share of local exports came from services. Sectors such as tourism and business services accounted for 82.7 percent of the city's exports -- with international tourism alone making up 51.5 percent of exports -- while manufactured, tangible goods made up 17.3 percent. Only one other city, Honolulu, came close to that breakdown, with 82.8 percent in services and 17.2 percent in goods. On the mainland, even tourism-heavy Orlando, Fla., had a more diverse export economy, with 62.1 percent in services and 37.9 percent in goods.

Too many services and too few goods have held Las Vegas back during the nation's economic recovery, Muro said.

"The largest growth of exports in the country has been driven by manufacturing, which Southern Nevada is noticeably light on," Muro said.

And so in 2009 and 2010, the value growth of Las Vegas' exports plummeted to 2.8 percent a year -- dead last.

"Exports really matter, and places like Las Vegas need to be smart about diversifying their exports," Muro said. "Your tourism people are pretty good at it, but it needs to become a central activity."

Travel and tourism led the way in local export value gains from 2009 to 2010, with $195.3 million in growth. Royalties, or management and control of intellectual property were a distant second, with a $27.7 million increase in value, which Muro attributed to corporations coming to Nevada for favorable taxes and regulations.

At the Governor's Office of Economic Development, officials say they're working on diversifying export markets.

The office on Tuesday issued a separate report that noted Nevada was one of four U.S. states to increase manufacturing exports in 2011 by 35 percent or more, according to the U.S. Department of Commerce. Nevada exported a state record of nearly $8 billion in goods last year, up $1.85 billion from $6.1 billion in 2010. Only West Virginia, Utah and New Mexico grew exports of goods more.

Major state goods exported included $4 billion in precious metals such as gold; $940 million in electrical machinery; $839 million in copper and other ores; $486 million in toys, games and sporting gear; $414 million in industrial machinery, including computer parts; $325 million in optical, photo, medical or surgical equipment; and $135 million in aircraft parts.

The office says it's working to boost exports of goods even more. Spokesman Dave Berns said the manufacturing and distribution sector is one of seven target industries for the office. The agency has hired Perry Ursem, a former building and economic-development executive, to run manufacturing efforts statewide.

Muro noted the newfound emphasis on building manufacturing across Nevada.

"I think the importance of manufacturing is recognized by the state, and there's a bipartisan effort going on to really think about diversification of export-positioning," he said.

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