The Day Wall Street Went Bust, and Took Vegas With It

The casino industry had always believed it was exceptional. That changed five years ago.

Illustration by Jesse Sutherland

Illustration by Jesse Sutherland

As Las Vegas descended into the maelstrom of the Great Recession, September 29, 2008, was a signpost that things were going to get worse before they got better. As a series of alliterative afflictions—from the credit crunch to the mortgage meltdown—were thrashing the national economy, it became clear that Americans would no longer have much disposable income to lavish on gambling in the Silver State.

The slope, of course, was already going the wrong direction: After several lush years, statewide gaming win had fallen in September 2007, the first sign that boom was turning to bust. Now, a year after that distant early warning, came another blow: a historic sell-off on the New York Stock Exchange, which suffered its third-worst day since World War II. In a single day, $1.2 trillion was wiped out.

The crash was a bleak reminder that there would be no quick national turnaround, and it augured a steep plunge in Nevada casino win. The fourth quarter of 2008 saw a 19 percent slide in statewide casino win, the most severe to date. Even worse, the Strip, which had led the state’s post-9/11 turnaround and which had widely been touted as recession-proof, saw its win plunge by 22 percent.

This was not how the world was supposed to work. People were supposed to flock to Las Vegas, rain or shine, recession or prosperity. The city started to fall off the good lists (fastest-growing metropolitan area) and started to lead the bad ones (foreclosures and underwater homes). This was as profound a shock to the psyche as Las Vegas had ever suffered. The natural order of things, it seemed, had reversed.
Before September 29, Nevada had posted only one month of double-digit gaming-win decline. Executives could plausibly argue that the industry was doing as best it could and was on course to ride out the recession. But after the crash, things got much worse. In October, gaming win on the Strip fell an unprecedented 26 percent, starting a series of double-digit monthly slides that was to last, with one respite, for a full year.

After the crash, Boyd Gaming’s August 2008 decision to halt construction of its massive Echelon project no longer seemed so timid. Psychologically, that terrible day on Wall Street might have been the moment we realized that the fantasyland of the Strip is not immune to dark economic realities.

The scars of that week still remain. It’s telling that while the national recession officially ended in June 2009, and the stock market eclipsed its prerecession highs earlier this year, Nevada gaming has still not topped its 2007 high-water mark and has not regained the ground lost in the year following the September 2008 stock sell-off.

For years, boosters had been successfully arguing that Las Vegas was not only an integral part of America; it was the leading edge of the nation’s future.

Five years ago, we learned just how right they were.