Think tank puts LV on list of losers

A California think tank has put a fresh spin on the city's "Lost Wages" nickname.

The Las Vegas Valley's rising joblessness and unimpressive salary gains earned it a place on the Milken Institute's list of "Biggest Losers," a collection of erstwhile high fliers that crashed when the housing economy ground to a halt.

When the institute published its 2008 list of "Best Performing Cities" on Wednesday, Las Vegas missed the top 25 for the first time since the group began releasing the report in 2003. Instead, Las Vegas came in at No. 75, a 66-spot drop good enough for No. 9 on the top losers roster.

The Milken study evaluates job formation, wage growth and improvements in high-tech gross domestic product, among other indicators.

The measure that really sank Las Vegas' 2008 performance: job creation. As the city's housing market turned south in 2006 and 2007, builders shed jobs en masse, said Armen Bedroussian, a research economist with the Milken Institute. That job loss filtered down to housing-centric sectors including appliances, furniture and other big-ticket durable goods. By Milken's reckoning, Bedroussian said, employers in the Las Vegas Valley jettisoned 6,000 jobs from 2006 to 2007.

Toss in a slowing global economy and its effect on tourism -- visitor volume here dropped 1.1 percent through July when compared with the first seven months of 2007 -- and the valley's job growth slackens even more, Bedroussian said.

Anemic job growth in turn depresses salary increases, thus pushing the valley even farther down the Milken list.

For an example of how a slower housing market can spread throughout the broader economy, look at Colour Concepts Interior Design.

Company President Caren Polland hasn't let anyone at her three-employee company go since the slump began. But her office, which used to hum with activity six days a week, now opens for business just four days a week. And Polland has shelved a plan to buy her own office building as she waits for business to pick up.

"We're optimistic that this is just temporary, and things will turn back around," Polland said. "We're just hanging in there."

Ed Jamison can also testify to the ripple effect of a torpid housing economy.

Jamison is chairman of Community Bancorp, the holding company for Community Bank of Nevada, and in the credit applications he receives and the conversations he conducts with commercial borrowers, he sees dwindling employee counts, especially among real estate-oriented businesses.

"We're still making SBA loans and commercial loans on an ongoing, regular basis, but not in the volume we did before," Jamison said. "And with anything that has any relevance to real estate lending, we're definitely not doing the same volume."

The spillover affects moving companies, mattress stores, furniture shops, lighting companies -- a whole host of retailers and manufacturers who serve home buyers and builders.

The falloff in customers means an accompanying dip in the number of companies seeking commercial loans. Jamison declined to disclose data on his bank's lending volume, but he said the change in loan requests has been "noticeable."

"If no one is buying their services, they don't need capital to expand," he said.

Still, Bedroussian said he sees positives amid the institute's data, and Las Vegas' long-term prospects feature some bright spots as well.

First, Las Vegas suffered in the rankings because of steep job loss between 2006 and 2007, but the valley's performance looks considerably better based on broader trends. Las Vegas still owns the No. 1 rank in America for job growth between 2002 and 2007.

And Bedroussian foresees a return to more traditional, Las Vegas-style growth once the housing market stabilizes, with a steadier balance between inventories and sales and an end to dropping prices. A healthier housing market should help loosen the credit crunch depriving so many businesses and consumers of capital for spending, investment or expansion, Bedroussian said.

Also, Las Vegas claims long-range dynamics that should bolster job formation and wage growth in the next half a decade or so.

Nevada still posts a lower cost of doing business than some neighboring states, such as California, so the Silver State and its metropolitan areas should remain hotbeds of business formation, Bedroussian said. What's more, lower housing prices could restore Las Vegas' reputation as an affordable haven for working-class families. And new resorts on the Strip should pique the curiosity of travelers worldwide, he added.

"There are multiple projects in the works on the Strip, so there are a lot of fascinating amenities being put together," Bedroussian said. "That will grab people's attention. Las Vegas definitely has a lot of positives. Once it gets over the hurdle with the housing downturn, it should come back to where it was."

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