Casino-Rich Nevada Has Strong Economy, But It’s Not an Easy Place For Business

Posted on: July 10, 2019, 01:37h. 

Last updated on: July 11, 2019, 01:00h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Nevada is the casino gaming hub of the US, has a low unemployment rate, and does not levy personal income taxes. However, those traits don’t mean the Silver State is an easy place to do business.

The Las Vegas Strip, a prime engine of Nevada’s economy, but the state needs growth in other areas. (Image: Scripps Media)

In its annual survey of the best states for business, CNBC ranks Nevada 29th. Predictably, the leisure and hospitality industry is Nevada’s largest non-government employer, accounting for 28 percent of the state’s private workforce, according to the Nevada Department of Employment, Training, and Rehabilitation (DETR) research and analysis bureau.

Among the state’s top private employers are casino giants MGM Resorts International, Caesars Entertainment, Las Vegas Sands, and Wynn Resorts.

The CNBC survey, which placed Virginia at the top, considers 10 factors in its state-by-state rankings, combining scores from those categories into a composite figure to arrive each state’s overall place on the list. Those factors are access to capital, business friendliness, cost of doing business, cost of living, economy, education, infrastructure, quality of life, technology & innovation, and workforce.

The Silver State has a strong economy and solid infrastructure, but they can’t claim victory with its unskilled workforce,” according to CNBC.

Nevada’s workforce rank was 48 out of 50 states this year, down from 37 in 2018, earning the state a grade of “F” on the survey.

Good Marks And Black Marks

In May, Nevada casinos posted gross gaming revenue of $981.8 million, a six percent decline on a year-over-year basis. An area of concern is increased legalization of sports wagering across the US, a market previously monopolized by Nevada prior to the Supreme Court repealing a ban on the activity in 2018.

In May, New Jersey sportsbooks won $318.9 million, just ahead of the $317.4 million in winnings in Nevada. While sports wagering in markets outside Nevada is still in its formative stages, increased competition on that front could be one sign the state needs to enhance its economic diversity. The CNBC survey indicates there are other areas for improvement.

In addition to the failing workforce grade, Nevada earns “F’s” for education and technology and innovation, according to CNBC, though the state’s ranks in those two categories improved modestly from last year.

While Nevada does not have a personal income tax and does not use a corporate tax (a gross receipts tax system is used instead), the state garnered a “D” grade for cost living. Of the seven states with no income tax, only Alaska at no. 47 had a lower overall ranking in the CNBC study than Nevada.

Still, the cost of doing business in Nevada is compelling, earning an “A-” from CNBC and the state’s overall economic and infrastructure grades checked in at B+. Nevada’s unemployment rate is four percent, slightly above the national average.

Some of that four percent could be attributable to a recent slew of layoffs at MGM properties as part of that company’s cost-cutting efforts.

Searching For Diversity

Just as many casino operators look for ways to diversify their revenue streams, Nevada is looking for other contributors to the state’s economic composition.

Aside from its perch as the leading gaming market in the US, the state is looking to become a player in alternative energy, a move that could prove well-timed as coal production declines and utilities look for cheap, cleaner alternatives. Currently, Nevada is the second-largest US producer of geothermal energy and one of the top solar and wind states.