Hey, it's not like I enjoy proclaiming it all the time over here. But every once in a while, I must admit it can be a little satisfying to see a Brookings Institution study and Sun story confirm what I've been saying for some time now.
Local economic consultant Jeremy Aguero said the region must work to continue to provide adequate infrastructure, including water. He also made a subtle point about the relationship between the region’s strengths and weaknesses: “Right now, our biggest strength (low cost) is also our biggest weakness (because we underfund education).”
Las Vegas, relative to other cities, has low taxes and is filled with cheap buildings and cheap labor. The problem is that cheap, uneducated labor does not appear to be very useful at the moment or in the near future.
“The main policy implication is the human capital issue,” Parker said. “The extent to which Intermountain West cities are in recovery is highly correlated with education and skills. And we’re an outlier: We’re heavily dependent on industries that don’t require education.”
Indeed, the unemployment rate for those with a college degree is roughly 10 percentage points lower nationwide than those without a high school diploma, which probably understates the true picture because the undereducated are also more likely to be underemployed — they’ve dropped out of the labor force and thus aren’t counted in the official statistics.
Muro said this gap between those with college educations and those without simply confirms what’s been known for some time: “Education is a mainstay of success at the family, company, community and national level. There are few insights better documented than the benefits of education.” [Emphasis mine.]
As I said on Monday, the casinos can no longer be counted upon as a "free ride". We can't just expect new casino construction to prop up demand for construction jobs, which props up demand for new housing, which props up demand for housing construction, which props up the rest of Southern Nevada's economy. We may have lucked out in seeing this model work from 1989 to 2007, but all it really did was hide the weaknesses in this shaky economic model that ended up being exposed when "The Great Recession" hit and all the artificial demand for new casinos, new homes, new whatever fell like a row of dominoes.
However, it's not all bad news. Believe it or not, our long downward spiral finally looks to be over.
The worst of it finally appears to have passed.
After two years of economic decline, the gross metropolitan product of Las Vegas, which measures Southern Nevada’s total output of goods and services, grew slightly in the fourth quarter of 2009 [by 0.5% over Q3], according to a new report from the Brookings Institution.
The quarter also brought a substantial reduction in the foreclosure rate, although Nevada still leads the nation.
“When news has been bad for so long, things not getting worse is good news,” said Elliott Parker, a UNR economist.
Yes, there are signs of hope here. We're no longer seeing the mountain of foreclosures that seemed so mind-numbingly painful a year ago. We're no longer seeing the unemployment rate rocketing up to dangerous new highs, even though it's bad enough that it's still hovering around an already too high 13.8%. We are starting to see a return of economic growth, however so slight and lagging behind the rest of the country it is.
But again, I have to point out that we are lagging behind. We're especially lagging behind metro areas that have better PreK-16 education systems and more stable employment sources. Salt Lake City and Ogden, Utah, both have GMP (gross metro product) growth rates exceeding the national average and unemployment below the national average. Same goes for Denver, Boulder, and Colorado Springs, Colorado. So why is this? All of these areas boast a highly educated workforce employed in stable sectors like high-tech and biotech, and none were as dependent on the housing bubble and artificial "construction for the sake of construction" as Southwest areas, like Las Vegas and Phoenix (which is also lagging behind in economic growth).
So again and again, we come back to this dilemma. As long as our education system is broken and as long as we continue to make ourselves overdependent on the casinos and casino-fueled development, Las Vegas will continue to suffer under this radical boom and bust cycle that lives and dies on discretionary consumer spending. Sorry, but this is not how a major metropolitan area with 2 million residents and a state with over 2.7 million residents can survive!
We already know what's wrong with Nevada. We already know what's causing the prolonged suffering here in Las Vegas. When will we do something about it and start building the infrastructure for a better and more stable future?