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Economist: Las Vegas Unemployment Could Hit 8.7 Percent

LAS VEGAS, Nevada –- The drastic decline in worldwide travel in the aftermath of the Sept. 11 terrorist attacks could leave one of every 12 Southern Nevadans unemployed by the middle of next year and tens of thousands of others continuing to work reduced hours.

As many as 15,000 full-time casino jobs have been lost in recent weeks in a move to bolster corporate earnings, according to a survey of Las Vegas gaming executives.

No one is certain when that trend will reverse itself, with the Wall Street investment bank Bear, Stearns & Co. estimating it could take 15 months for Las Vegas casino industry results to return to pre-attack levels.

Every casino position lost in the 814,000-job regional economy leads to the elimination of one job elsewhere in the local economy during the ensuing six months, notes Keith Schwer, an associate professor of economics at the University of Nevada, Las Vegas.

"If this holds, you can double the number of layoffs ... because that will pick up elsewhere," Schwer said.

That would theoretically see the region's unemployment rate jump from 5.1 percent and 41,200 people in August to 8.7 percent and 71,200 people, assuming the total labor force remains at 814,000 people.

"It is a possibility. The whole question is how many heads can we put in the (hotel) beds?" he observed.

The 8.7 percent unemployment scenario doesn't include the impact of potential layoffs in the 73,000-worker construction sector, where every lost job eliminates two other positions, Schwer said.

The economic impact of the terror attacks is reflected in the experience of locals casino giant Station Casinos, which will announce today that it has sustained a 7 percent to 9 percent decline in the average daily total of money won from gamblers since the attacks.

The decline is a likely sign that newly unemployed casino workers are not gambling and area residents, in general, are staying home.

The company's hotel revenues have fallen as much as 27 percent since the attacks, although its seven major Las Vegas-area hotels generated just 5 percent of Station's overall revenue during the first half of the year.

Despite the revenue declines, the dominant player in the $1.5 billion locals gambling market has not laid off any workers, although it has cut employee hours in some departments, according to a statement to be released today.

"Due to the uncertainty, we are reviewing all aspects of our business for opportunities to reduce costs," Station Chief Financial Officer Glenn Christenson said in the statement. "As a result of lower revenues, we have had to be creative in developing ways to reduce payroll costs. We have used a flexible scheduling system and reduced hours for employees in certain departments."

Word of the Station results followed a Friday announcement by Mandalay Resort Group that its third-quarter numbers will "significantly trail" last year's third-quarter results of 38 cents a share because of the worldwide travel decline.

Mandalay executives will announce the company's actual results after the close of the quarter ending Oct. 31, and they have eliminated 4,500 jobs in recent days, or 15 percent of the workforce at its 11 Nevada properties. No cuts have come at the company's casino in Detroit, northern Mississippi and southern Illinois, where drive-in visitors dominate the customer base.

The company's 120 highest-paid managers have cut their own salaries by about $5 million.

Park Place Entertainment, MGM Mirage, the Aladdin, The Venetian, Rio, Harrah's, Riviera, Binion's Horseshoe and Stardust also have cut thousands of jobs. Mandalay Resort Group shares are down 32 percent since the attacks to close Friday at $16.23. Stations Casinos shares are down 31 percent since the attacks to close Friday at $8.40.

The locals gaming giant generates nearly 90 percent of its revenues from slot play, a source of cash flow that company Chairman Frank Fertitta III has long characterized as a stable one that is insulated from the ups and down of Strip play, where the megaresorts are dependent upon air travel and high rollers, who wager as much as $100,000 a hand.

But Schwer said the post-attack dynamic is reflective of anything but normal times. "I didn't believe the hotels would be quite as quick as they were with the cuts," he said. "But if these cuts were to hold for more than a couple of quarters, we would definitely be feeling the (impact). It's still just wait and see."

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