Manufacturing sector growing as Nevada diversifies beyond tourism

Nevada is growing industries that historically haven’t been major economic boons for the state, diversification that experts say will reduce the reliance on tourism revenue.

Manufacturing, an industry that typically makes up a small part of the state’s revenue, is the fastest-growing sector in Nevada, said Bob Potts, research director within the Governor’s Office of Economic Development. Experts say the recession hit tourism-reliant Nevada especially hard, and the state has taken steps to diversify its economy to better withstand downturns in tourism.

“It was a slow recovery, but then, once people decided to get on, man, it took off,” Potts said. “It’s really taken off.”

A recent report released by the Las Vegas Global Economic Alliance used input from dozens of manufacturing businesses to create a snapshot of the industry. One concern focused on a lack of skilled labor in Nevada, with companies calling for more programs to train qualified workers.

Nevada’s 4.7 percent unemployment rate is slightly higher than 4 percent in the rest of the nation through June. Las Vegas stands at 4.7 percent while Reno is below the national figure at 3.5 percent, Potts said. Nevada’s labor force and job market are expanding at roughly the same rate, he said, noting that the state’s goal for the last six to eight years has been getting people quality employment.

“Job growth is great and it’s what we’re all about, but trying to diversify into some of the sectors that are more resilient to inevitable business cycle downturns is the goal of economic development as well, not only to bring jobs in,” Potts said.

Potts helps companies find information, such as the cost and availability of labor, so that they can decide whether they want to do business in Nevada. He also keeps track of how local and regional economic development agencies in the state are performing. Potts said these groups have been key in helping to diversify.

Potts said companies such as Tesla have helped grow the manufacturing industry in Nevada. Tesla received a $1.3 billion tax incentive package from the state, and recently committed $1.5 million to Nevada education. Big names like Tesla drive other companies to the state, Potts said, sometimes bringing a few hundred jobs with them.

“If you take all those drops in the bucket, pretty soon you’ve got a full bucket,” he said.

Data shows 38 percent of the jobs created through economic development efforts in the state have been in manufacturing, Potts said. Year-over-year job growth in that industry is almost 14.5 percent, he said.

A small base makes faster growth possible, Potts said, which is the case in the manufacturing industry in Nevada. Manufacturing made up roughly 3.5 percent of the state’s jobs in 2010, rising to about 4 percent today, which Potts said might appear to be a small overall number of jobs, but is a significant net change.

“What that sets in motion is a whole bunch of other activity that goes along with that,” he said, pointing to logistics and transportation, warehousing and other supply-chain industries. “Those are all the other jobs that tend to come along with that kind of inertia that takes off.”

The manufacturing industry has led in jobs stemming from economic development efforts, followed by 27 percent in information technology, about 17.5 percent in logistics in operations, and 5.5 percent in health care.

“It takes a lot of assisted jobs in economic development and companies that we’re directly working with to actually move the needle,” Potts said.

As more states expand into marijuana and gaming, researchers warn that Nevada’s share of the nation’s revenue from so-called sin tax may decrease, impacting tourism along with it. Nevada, however, does not expect a significant downturn in tourism as other states expand into gambling and other sin taxes, including marijuana, said Bill Anderson, director of the Department of Taxation.

“Outside of a full-blown recession, I don’t anticipate that tourism will take a tumble here in Nevada,” he said. “Despite the growth in gaming elsewhere, until recently Southern Nevada tourism stood at record highs.”

He said numbers have fallen slightly since those record highs, but that some of that is due to projects on the Strip and some rooms being taken offline for remodeling.

“We do have these roughly 40 million visitors in Southern Nevada, and several million more up here in Northern Nevada,” he said. “They come here, they purchase alcohol, they purchase cigarettes and they go shopping and whatnot. That all contributes to our sales tax, to our liquor taxes, to our cigarette taxes.”