Report Says Las Vegas Has World's Fifth-Worst Economy
Study cites city's limited economy as reason for its economic woes.
Dec. 1, 2010— -- A study released by the Brookings Institution and the London School of Economics ranked Las Vegas' economy as one of the world's five worst, due in large part to oversized bets on real estate.
The only cities that fared worse than Las Vegas at 146 in their ranking of 150 metropolitan areas were Dublin, Ireland, Dubai, United Arab Emirates, Barcelona, Spain, and Thessaloniki, Greece. The rankings weigh jobs, job growth and income, comparing recent performance to pre-recession metrics.
Alan Berube, a senior fellow and research director of the Brookings Metropolitan Policy Program, said the characteristic the cities at the bottom of the list shared were their dependence on housing and the real estate market.
"Places like Dublin, Dubai, Barcelona, Las Vegas - all of those metropolitan areas got caught up in real estate bubble," Berube said.
In contrast, he said, the cities with the top ten economies were mainly Asian and Latin American cities that had been exporting raw materials and commodities that were in demand before, after and during the global recession.
Stephen Brown, director of the University of Nevada in Las Vegas' Center for Business and Economic Research, said that he believes the report is an accurate reflection of the economic situation in Las Vegas, but that it doesn't take into account Las Vegas' economic viability in the long-term.
The U.S. economy as a whole is still weak, but once the U.S. bounces back, Las Vegas will, too, Brown said.
"To me the Brookings report reads more of a Hollywood 'who are the hot actors right now' list," he said. "I would be surprised if investments would be made based on this list."
Robert Lang, director of Brookings Mountain West at the University of Nevada Las Vegas, tracks the growth and struggles of western cities like Denver, Phoenix, and Las Vegas.
"Where is Las Vegas compared to the last 20 years of performance? It's terrible. But it's still better than a place like Buffalo," said Lang. "This is a useful statistic, but it doesn't tell you what your opportunities are or where you're going."
The U.S. city with the strongest economic growth in 2009 -2010 was Austin, Texas, according to the report. The study attributes Austin's growth to its highly educated population, and like other Texas cities, Austin also largely sidestepped the housing crisis that crippled Las Vegas, Phoenix, and other U.S. cities.
Austin, Texas Tops List of Economic Recovery
The report's findings weren't a surprise to Dave Porter, a senior vice president of economic development with the Austin Chamber of Commerce. The chamber's data has shown positive economic vital signs in recent years, including job growth.
"The State of Texas has always been considered one of the most favorable business climates in the country," said Porter, noting the fact that there is no state corporate income tax. "Companies are looking at getting out of high cost areas and going to less expensive areas like Austin."
As the state capital and home of the University of Texas, Austin has a highly-educated labor force that is a magnet for tech companies, Porter said.
According to the Chamber's records, 186 companies have relocated to Austin or added a presence in the city since 2004, in industries that range from biotechnology to solar energy to social networking. Just this year, Facebook picked Austin as the location of its first major office outside of California.
"Well-educated cities and globally-linked cities have done well in this downturn. They have workforces that are less likely to get laid off," said Lang.
The report says that improving Las Vegas' low rate of college degrees from 22 percent of adults would be crucial in helping diversify the city's economy. But Brown said that although having a more educated population could help Las Vegas from being hit so hard in future economic downturns, he doesn't think it's as crucial to the city's recovery from this recession - which he says will just come as the nation recovers. He noted that cities like Rio de Janeiro, which were ranked in the top ten on the Brookings list, weren't well-known for their educated populations.
Berube said that the service-based economies of many U.S. cities require their workforce to be more highly educated.
"The value of educational attainment depends on what state of development your city or nation is in," he said. "If you're in a lower income place, and a lot of what you do is commodities, it's not as important to have a highly educated population."
Ten Cities With Worst 2009-2010 Economic Performance
1. Dublin, Ireland
2. Dubai, United Arab Emirates
3. Barcelona, Spain
4. Thessaloniki, Greece
5. Las Vegas, United States
6. Valencia, Spain
7. Riga, Latvia
8. Johannesburg, South Africa
9. Madrid, Spain
10. Athens, Greece