Las Vegas led the nation in construction job losses in 2010, and national and local experts alike say the city’s building slump may not be over.
A Monday report from the Associated General Contractors of America revealed that Las Vegas shed 10,700 building-sector positions last year, for a 20 percent loss in its construction jobs base. The city lost more building jobs than markets many times its size, including Chicago, Los Angeles, Philadelphia and Atlanta.
Ken Simonson, chief economist for the Associated General Contractors, blamed the falloff on the completion of some major area projects, including The Cosmopolitan of Las Vegas, completed in December, and the Hoover Dam bypass bridge, which opened in October.
"There were some large projects left from before the downturn started, and they wrapped up in 2010," Simonson said. "Construction workers on those projects haven’t been able to find new jobs."
The jobs decline is especially troubling when you consider its broader economic impact: Numbers compiled by researchers at George Mason University show that each lost building position correlates to two additional job cuts among businesses ranging from building-supply vendors to the coffee shops and retail stores where laborers spend their salaries, Simonson said.
The new figures do show a slight improvement when measured against the 30 percent-plus losses Las Vegas experienced in 2008 and 2009. The Napa, Calif., market has displaced Las Vegas for the country’s steepest percentage decline, with a 36 percent drop in 2010.
For sheer number of jobs lost, though, Las Vegas has turned in the nation’s worst performance for years, Simonson said.
That’s because the city enjoyed the nation’s biggest boom for the better part of two decades, local observers said.
As developers struggled to build enough homes, offices and shopping centers for the 1 million new residents who moved here from the late 1990s on, construction surged to consume 12.1 percent of the city’s jobs base at its June 2006 peak, said Brian Gordon, a principal in local research and consulting firm Applied Analysis. That share was well beyond a national average of around 5 percent.
Now, the Strip has no new projects under way. And with local vacancy rates hovering around 24 percent in office parks, 10 percent in retail projects and 17 percent in industrial centers, there’s simply no demand for new construction, Gordon said. As a result, the city’s construction jobs base has contracted to 5.5 percent of its overall job market — much closer to typical proportions around the rest of the country.
Statewide, construction’s share of the jobs base plummeted from 12.7 percent to 5.3 percent, costing roughly 90,000 industry workers their jobs, said Steve Holloway, executive vice president of the Las Vegas chapter of the Associated General Contractors.
Simply put, Las Vegas had much further to fall on the construction side than pretty much any other U.S. city.
"During the boom that took place from 2004 to 2006, we were constructing more inventory on a relative basis compared to other major markets," Gordon said. "The timing of those investments resulted in new product at the exact time when we needed less. The correction that is taking place today is going to extend for a number of years as our vacancy rates start to adjust to the market’s new realities."
That means construction jobs could continue to dwindle here, as smaller tenant-improvement and refurbishment jobs replace the big developments that characterized building work in better times, Gordon added.
The local building sector’s prospects remain bleak, Simonson said, because it’ll be difficult to finance new resorts for the foreseeable future, and the business and leisure travel that underpins the area’s economic fortunes won’t return full force for some time. Plus, federal funds designed to boost building jobs through infrastructure spending are headed downward and will probably continue to fall, Simonson said.
"I’m afraid there may be some workers still on payrolls who have yet to lose their jobs," he said.
Holloway agreed that added pain could be ahead for the city’s construction industry.
There’s talk of shifting $425 million in local Clark County School District funds destined for buildings and other capital improvements to help cover administrative costs instead. Such a move could cost another 5,000 industry jobs, Holloway said.
But if the 2011 legislative session, set to begin Feb. 7, yields strong strategies for economic diversification and business retention, as well as fresh investments in infrastructure, the construction sector could stabilize, Holloway said.
Gordon said he wouldn’t be surprised if the city’s construction jobs base continued to slide, falling below that 5 percent national average.
"Given the excess development that took place, we advanced a lot of the demand for construction-related employment during the boom," he said. "The market’s being penalized for that today."
Contact reporter Jennifer Robison at jrobison @reviewjournal.com or 702-380-4512.