The Growth and Decline of Casinos and Casino Hotels Across the US

December 15, 2014 by Emsi Burning Glass

image of Lightcast gradiant

In his New York Times, Steven Yaccino tells the story of Deadwood, the famous old Western town in South Dakota that 25 years ago joined a modern day gold rush: legalized gambling. After a destructive fire in 1987, it was casinos and casino hotels that helped give the town new life—at least for a while.

Today, Deadwood is struggling again. Yaccino suggests (in passing) that this is due to increasing gambling legalization across the US. It sounded like a reasonable explanation, but we wanted to dig deeper. Would the data tell us a story of decentralization? Is local unemployment behind it? Does the industry mix explain anything? Is Deadwood, like other highly concentrated cities for casinos, simply another victim of the recession?

After looking at EMSI’s labor market data in Analyst, we’re inclined to believe it’s a combination of most of the factors above. At the national level, casinos and casino hotels have taken a big hit, but they have shown signs of recovering in the past few years (as the chart on the right shows).

Our Approach

For this analysis, we looked at the states and MSAs most concentrated in casinos and casino hotels (NAICS 713210 and 721120), as well as how their per-capita concentration has changed since 2001. Deadwood is part of the Spearfish, South Dakota, micropolitan statistical area, which consists solely of Lawrence County. By looking at EMSI’s ZIP code data in Analyst, we noticed the majority of the casino and casino hotel jobs in the Spearfish MSA are in Deadwood, so we were careful to look out for Spearfish in the analysis.

State Analysis

We focused on the states that have the highest concentration (location quotient) of casinos and casino hotels, and we used shift share to determine their competitive effect—that is, how much of the growth or decline is a result of local factors. What we noticed: The areas with greater concentration (the national average equals 1.00) generally showed negative competitive effects while the areas with lower concentration generally showed positive competitive effects. Those states with higher unemployment also tended to have a negative competitive effect.

State NameUnemployment Rate2001 Jobs2014 Jobs2001 - 2014 Change2001 - 2014 % Change2001 Location Quotient2014 Location QuotientCompetitive EffectNevada7.1212,839189,987(22,852)(11%)68.9661.27(2,761)Mississippi7.637,14722,004(15,143)(41%)10.667.45(11,637)Louisiana6.220,32917,296(3,033)(15%)3.523.41(1,115)West Virginia6.5546,2306,17611437%0.033.366,180New Jersey6.645,08826,135(18,953)(42%)3.882.64(14,697)Iowa4.53,7309,5785,848157%0.842.366,201Indiana5.715,58313,820(1,763)(11%)1.801.83(292)South Dakota3.31,3951,68228721%1.181.51418Missouri5.98,5709,0654956%1.051.271,304Pennsylvania5.44516,45016,40536456%0.001.1216,409Source: EMSI 2014.3 Class of Worker - QCEW Employees, Non-QCEW Employees, and Self-Employed

From 2001 to 2014, Nevada lost over 22,000 casino and casino hotel jobs, more than expected given national trends. It still has significantly higher concentration than the others, which means it’s likely to feel the changes of the casino industry, for good or ill, to a greater degree than other states. Mississippi and Louisiana had similar drops. But West Virginia and Iowa gained more than 12,000 jobs and increased their concentration since 2001, suggesting decentralization. We also noticed that in many of these cases, the greatest drops in jobs aligned with the recession and that gradual recovery across the industry has begun to impact many of these states (see the first graphic).

Most Concentrated MSAs Show Job Decline

Of the top 10 MSAs for casino employment concentration, more than 75% showed significant decline in jobs, competitive effect, and even concentration between 2001 and 2014.

MSA Name2001 - 2014 ChangeCompetitive Effect2001 Location Quotient2014 Location QuotientAtlantic City-Hammonton, NJ(18,733)(14,499)108.0780.02Las Vegas-Henderson-Paradise, NV(5,407)10,34078.6671.92Gardnerville Ranchos, NV(4,615)(3,869)125.1368.37Elko, NV(958)(489)73.8757.61Spearfish, SD23135641.3850.75Reno, NV(11,314)(8,601)49.9733.87Gulfport-Biloxi-Pascagoula, MS(6,434)(4,726)37.3628.73Vicksburg, MS(887)(631)32.1728.24Pahrump, NV(545)(416)45.1527.83Fernley, NV2703019.7718.84Source: EMSI 2014.3 Class of Worker - QCEW Employees, Non-QCEW Employees, and Self-Employed

The areas with stronger job growth, competitive effect, and concentration were, in most cases, smaller MSAs like Fernley, Nevada, and Spearfish, South Dakota, while larger MSAs like Vegas and Atlantic City tended to show decline. This was particularly interesting since it showed the Spearfish MSA (and by proxy Deadwood) was actually faring better than many larger MSAs.

As Yaccino notes, the legalization of gambling has boosted the economies of smaller regions that are able to support gambling at a modest level, while larger metros (and those that have risked concentrating more casino hotels in their areas) have declined. Classic decentralization.

The Case of Deadwood and Spearfish

Comparing Atlantic City and Las Vegas with Spearfish and Fernley across all industries, we saw that all of these regions have high concentrations of casinos (and related industries), but the former two have declined while the latter two have grown. We considered industry mix as a factor, but this suggests that industry mix didn’t explain what’s happening with Deadwood.

It’s also possible that the tiny city’s decline is related to regional unemployment, which in turn is probably due to the recession. Success of the casinos and casino hotels is often tied to the health of the surrounding economies. Because so much of Deadwood’s economy is driven by an industry dependent on people having excess money to spend, their region is more likely to feel the impact of recessions.

In the end, the reason that Deadwood seems to be struggling is simply that the casino and casino hotel industries have been hit hard. However, things may be looking up for Deadwood for a few reasons. First, we’re seeing an economic recovery at the national level; second, we’ve seen evidence that smaller MSAs are likely to fare better than larger MSAs; and third, the Dakotas are among those states recovering better than many others. Deadwood just might get swept along with the overall success.

For more on EMSI data, email Josh Wright. Follow EMSI on Twitter (@DesktopEcon) or check us out on LinkedIn and Facebook.