Market Update: How an economic downturn could impact Las Vegas – Full Analysis

The Las Vegas Valley is better prepared now for an economic downturn than it has been in the past but is still relatively exposed because of a lack of economic diversity, according to one of UNLV’s top economists.

The valley was one of the hardest hit cities in the country during the 2008 Great Recession, according to U.S. Census Bureau statistics, and the city’s tourism and gaming industry found itself on life support during the COVID-19 pandemic.

Daniel Chi, a professor and the chair of the Lee Business School at UNLV, said Las Vegas needs to continue its push to diversify its economy before the next economic shock, as the first thing Americans do when the economy is suffering is tighten discretionary spending such as vacations.

He noted after the housing bubble burst in 2008, the national unemployment rate peaked at 10 percent, but Nevada hit 13.4 percent, and then during the pandemic, the overall U.S unemployment rate peaked at 14.8 percent, and Nevada hit 30.5 percent.

“So that is why the past few economic downturns Vegas was hit harder than the national average because a bigger proportion of our economy was dependent on tourism,” Chi said. “And so they cut that discretionary spending and come to Las Vegas less, and therefore we see the revenue loss and the layoffs.”

Is the stock market the next economic downturn?

Some economic analysts are pointing to the stock market showing signs of weakness and a potential crash given all of the capital pouring into artificial intelligence, which some say shows similarities to the dot-com bubble that hit the U.S. economy hard in the late 1990s.

Gold, silver and cryptocurrencies have also been on a roller-coaster ride over the past year, and the last stock market crash was in early 2020 when the pandemic swept across the globe.

Chi said the stock market is susceptible to short-term volatility, but over the long term, it has consistently gone up. He said the S&P 500 is a great barometer for the overall health of the U.S. economy given its a diversified portfolio, and he said right now, the market appears to be stable.

“If you look at gold or silver or any particular financial asset, it’s hard to pinpoint what the aggregate should be,” he said. “However if you hold a wide portfolio that represents the overall U.S. economy, over time, the economy has improved, and it has gone up over time.”

Chi said that while the stock market’s Magnificent Seven (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla), which some economists believe is holding up the U.S. economy from a crash or potential downturn, are mostly down (only two have outperformed the S&P 500 over the past year, Nvidia and Apple), other stocks have picked up the slack, including Wal-Mart, Visa and Exxon Mobile.

Diversify or die?

Las Vegas Valley real estate had a down year in 2025, the lowest sales total since 2007, and the overall economy found itself in a slump because of a drop in tourism numbers. Daryl Fairweather, the chief economist for Redfin, said 2025 was once again a great example of how volatile our local economy is.

“Las Vegas has always been a market that booms and busts,” she said. “The Las Vegas economy is built around discretionary vacation spending, and any time the economy is in trouble, domestically or internationally, the Las Vegas housing market feels it. Right now, Las Vegas is a buyer’s market, as Americans have lost their consumer confidence, and international tourism has fallen. If the stock market were to crash, consumer confidence would go down even more, and that would hurt Las Vegas.”

Assemblyman Brian Hibbetts, a Republican from District 13, said the state needs to prepare for the next economic downturn by making sure it’s an attractive place for businesses to set up shop and by fostering new local businesses to start.

“And I always tell people it’s not businesses we need, it’s industries. We can bring all the businesses we want here, but that doesn’t necessarily mean it’s working,” he said.

Hibbetts said that the state should continue its push for business incorporations, which has long been dominated by Delaware. That state makes about $2 billion in incorporation-related revenue annually, according to data from Delaware. Meanwhile, Nevada brought in about $235 million in commercial and incorporation fees last year.

A recent Assembly Joint Resolution — sponsored by two Democrat Assemblymembers — passed in the Nevada Senate and would amend the state’s constitution to establish a special court dedicated to cases involving shareholder rights, mergers and acquisitions and other business-related matters. The proposal has to go back to the Legislature in 2027 before going to a general election vote.

And the Nevada Supreme Court is looking to create a dedicated business court unrelated to the Assembly bill.

Hibbetts said this issue of economic diversity should definitely be a bipartisan effort before the next economic shock comes, but it appears people from both sides of the aisle can’t seem to get on the same page.

“It’s funny because as politicians, and I don’t care what party you’re on, we’re always all campaigning on diversifying the economy,” he said. “And then when it comes time to do it, the left says, well, we don’t want to do it like that because it would reduce revenue for the state. And God forbid we can’t cut people’s taxes. And then the far right says, well we don’t want to do it like that because we shouldn’t be picking winners and losers by offering incentives that are necessary for a particular industry, so let’s not do that. So we end up stuck in the same place that we’ve always been and relying on people’s discretionary spending income, which is absolutely the first thing people cut when the economy goes.”

Economic warning signs?

In a recent report titled “When America (and Nevada) Works, Prosperity Happens: The Essential Connection Between a Job Market and Economic Health,” local economic analyst John Restrepo laid out the state’s structural economic vulnerabilities.

“Nevada’s employment and economic challenges reflect deep structural factors that extend beyond cyclical economic fluctuations,” the report said. “The state’s extreme concentration in tourism and gaming creates unique vulnerabilities. Leisure and hospitality accounts for approximately 23 percent of Nevada’s total employment, compared to just 11 percent nationally. This makes Nevada more than twice as dependent on tourism-related industries as the typical American state.”

The report notes casino and hotel employment in the state peaked in 2006 at approximately 215,000 workers but currently sits at 153,000, a 29 percent drop over the past two decades.

Restrepo’s report notes two other key areas for economic vulnerability in the state and the Las Vegas Valley in particular on top of its over reliance on tourism and gaming.

“Federal land ownership constrains Nevada’s development options,” the report said. “Approximately 85 percent of Nevada’s land is federally owned, dramatically limiting areas available for residential, commercial, or industrial development. This restricts the state’s ability to diversify its economic base and creates artificial scarcity that drives up costs for businesses seeking to locate in Nevada.”

The report notes that only 28.7 percent of Clark County residents 25 years or older have a bachelor’s degree or higher, which is well below the national average of 36.2 percent. That limits the state’s competitiveness for “high-wage professional and technical positions that could broaden the economic base beyond tourism,” the report said.

“The combination of these factors — tourism dependence, federal land constraints, and workforce skill gaps — creates a challenging environment for economic diversification,” the report said. “State initiatives to attract technology companies, advanced manufacturing, and professional services face headwinds from these structural limitations. While Nevada has successfully attracted some major corporate facilities, including Tesla’s Gigafactory and various data centers, these projects represent incremental progress rather than transformative economic restructuring. The path toward a more balanced and resilient Nevada economy remains long and uncertain.”

Contact Patrick Blennerhassett at pblennerhassett@reviewjournal.com.