Coronavirus crisis suggests Las Vegas economy remains a one-trick pony

Las Vegas economyEver since becoming New To Las Vegas in 2016, I’ve heard plenty of local claims the Las Vegas area is successfully diversifying its economy away from reliance on the sin stuff that long made the Strip famous (or infamous): gambling, entertainment and lodging. Building a knowledge-based, tech-driven economy for the 21st Century, local leaders proclaimed. It’s no longer like 2008, they said, when the Great Recession abruptly dried up tourism and all the sectors associated with it. The Las Vegas Valley was one of the country’s hardest-hit area, and recovery took a long time.

But to my mind, the coronavirus pandemic already is giving the lie to those economic diversification claims hereabouts.

The Las Vegas Valley is reeling and had been even before Gov. Steve Sisolak last night ordered a minimum 30-day statewide closure of all casinos, restaurants, bars and other non-essential businesses. World-famous Las Vegas Strip resorts–Encore, Wynn, Cosmopolitan, Venetian, Palazzo, all eight MGM properties–were already shutting down their operations. Famous entertainment acts–Cirque du Soleil, David Copperfield, Penn & Teller–went dark. Cascading layoffs are accelerating, although many of the casinos say they will keep workers on the payroll for varying lengths of time or at least cover health care premiums.

The Las Vegas Review-Journal announced it was suspending a number of sections, including its weekly entertainment guide. “With Vegas headliners going dark, resorts suspending operations, movie theaters closing, concerts canceling and social events being discouraged, there is not much left in this city to advertise or list,”  the paper wrote.

For days the Strip has looked like more of a ghost town than video I’ve seen of other famous tourist venues around the country like Times Square in New York, a city that has a lot of other industries. Leaders like Las Vegas Mayor Carolyn Goodman are blaming the distress on media publicity about coronavirus rather than the resulting illness itself. Her comments by themselves–she pushed strongly for casinos to stay open–might be evidence of non-diversification.

Let me offer some hard data to support my view.

According to the National Bureau of Economic Research, the official scorekeeper of such things, the Great Recession began in December 2007. In January 2008, according to the U.S. Bureau of Labor Statistics, the Las Vegas metropolitan area had 919,700 non-farm workers. Of these, 271,100 worked in what is called the leisure and hospitality industry, by far the largest single industry in Las Vegas and obviously centered upon the Strip. That includes the sin stuff, and works out to 29.5% of the total workforce.

Fast forward to January 2020, the latest month for which I can find BLS data and just before the impact of coronavirus. The non-farm workforce had risen to 1,034,000. Employment in leisure/hospitality also rose, to 289,600. That’s 28.0% of the total workforce.

To me, a drop from 29.5% to 28.0% over 12 years is technically a diversification, but not much of one. And remember, this is the Las Vegas industry that overwhelmingly brings in the money from outsiders rather than the other industries, which tend to swirl around what’s already here. And one where very few of the employees can work from home. By comparison the New York metro area also has a big entertainment and tourism industry–Broadway, anyone?–but it employs only 9.2% of the nonfarm workforce.

Despite large publicity given to some relocations and startups, the manufacturing industry here rose over 12 years just 500 jobs and dropped as a slice of total employment from 2.8% to 2.6%. Ditto the information industry, up a mere 100 jobs but down from 1.2% to 1.1% of total employment.

As has been the case elsewhere in the country, the biggest-gaining industry, in both jobs and percentage points, was education/healthcare, from 66,400/7.2% in 2008 to 105,000/10.2% in January. Yet in those two categories the Las Vegas area still ranks poorly by many national metrics. The second-biggest-gaining industry was professional/business services, which might not be surprising given the scores of local billboards advertising lawyers. That segment rose from 116,100/12.6% in 2008 to 154,800/15.0% in January.

A recent study by the Milken Institute of “Best-Performing Cities” ranked the Las Vegas area economically 44th among the country’s 200 largest metropolitan areas. That’s good, but Vegas was much higher–No. 23–when the list was last done in 2018. The study overweights high-tech growth. In the new study Las Vegas ranked No. 7 among the 200 in five-year high-tech GDP growth–perhaps because the opening base was so low–but only No. 113 in one-year high-tech GDP growth and a dismal No. 144 in an evaluation of the area’s high tech economy concentration in comparison to the national average.

When the coronavirus crisis passes, it will be interesting to see how fast Las Vegas recovers in comparison with other places. Perhaps a betting proposition for someone.

Follow William P. Barrett’s work on Twitter by clicking here.

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