ECONOMIC COMPETITIVENESS

Economic diversity

A diverse economy can help guard against economic instability and is vital to a region's long-term economic growth and resiliency. Ensuring that a region's economic health is not tied to a single industry or market sector can help communities better absorb the impacts of economic downturns and protect the economic viability of other industries.

Click "Change Filter" in the above chart to view the Hachman Index dating back to 1990.

Southern Nevada's economy diversifying, still trails peer regions

Southern Nevada has long been one of the least diversified economies in the county. However, the region's recent economic growth has been accompanied by an uptick in economic diversification, as the region's Hachman Index score has increased each year since 2011. In fact, with the exception of a lull during the Great Recession, Southern Nevada's economy has steadily diversified since 2000. However, because the region has historically relied heavily on only a handful of industries, it still trails nearly all Intermountain West peer regions by a healthy margin. While Southern Nevada's Hachman score topped out at .707 in 2017, cities like Phoenix, Salt Lake City, Denver, and Reno all have scores above .90.


To determine economic diversity, the Hachman Index compares the relative shares of the local economy with that of the national economy to identify the variances in each employment sector. Impacts are then aggregated to create the diversity index. A score of 1.0 reflects a diversified economy, while a score of 0 reflects a narrow economy. The Hachman Index assumes the national economy reflects broad diversity.

Clean tech, healthcare among target industries to see recent gains in Southern Nevada

The SNS Regional Plan and LVGEA's Comprehensive Economic Development Strategy both call for economic diversification within the region. The CEDS identified a set of target industries that should be the focus of the region's diversification efforts (see chart below).

.63

Banking & Finance
2016 Location Quotient

1.06

Business IT Ecosystem
2016 Location Quotient

.69

Clean Technology
2016 Location Quotient

.65

Health & Medical Services
2016 Location Quotient

The concentration of clean technology and healthcare jobs in Southern Nevada have been increasing relative to the national economy in recent years, and industry experts are projecting continued growth, especially with respect to the former. Nevada led the nation in clean energy job growth in 2018, according to an E2 report, and new statewide clean energy policies should continue to push growth in the industry. 

The concentration of employment in the banking/finance and business/IT ecosystems industries in Southern Nevada relative to the U.S. maintained relatively flat between 2012 to 2016. Employment concentration in the business/IT ecosystem industry in Southern Nevada has remained above the national average from 2012 to 2016, while the concentration of banking/finance jobs in the region has seen little change and remains well below the national average.

About the data

The Hachman Index is a measure of economic diversity that compares the composition of a local economy to the composition of the nation by taking the total employment of an industry in a state divided by total state employment, and comparing it to the nation’s equivalent. The above data was calculated by Applied Analysis for the Las Vegas Global Economic Alliance (LVGEA) using data from the U.S. Bureau of Labor Statistics.


A location quotient (LQ) is an analytical statistic that measures how concentrated a particular industry, cluster, occupation, or demographic group is in a region as compared to the nation. An LQ can reveal what makes a particular region “unique” in comparison to the national average. An Industry LQ is a way of quantifying how concentrated an industry is in a region compared to a larger geographic area, usually a country. 


An LQ is computed as an industry’s share of a regional total for some economic statistic (earnings, GDP by metropolitan area, employment, etc.) divided by the industry’s share of the national total for the same statistic. For example, an LQ of 1.0 in manufacturing means that the region and the nation are equally specialized in manufacturing, while an LQ of 1.8 means that the region has a higher concentration in manufacturing than the nation. The locations quotients above are based on employment, using employment data from the U.S. Census Bureau's County Business Pattern (CBP) survey.


To learn more about economic diversification in Southern Nevada or for additional information on the data presented above, contact Southern Nevada Strong.

Last updated: July 2018