Photo courtesy of atlanticcityNJ.com

Atlantic City's Deep Recession
| published August 31, 2014 |

By Thursday Review staff

 

Not too many years ago, Atlantic City was Vegas East—an East Coast boom town of crowded casinos, gleaming high-rise hotels, busy restaurants and dazzling entertainment.

No longer.

Now Atlantic City—once oft-memorialized in books, television and film—has fallen victim to its own brand of localized, deep recession. By the end of Labor Day weekend, the gambling and entertainment mecca of the northeast U.S. will have shed more than 5000 jobs, the penultimate mass layoff in a city which has already seen thousands of jobs vanish.

This weekend, two major hotel-casino facilities will shutter their doors—The Showboat on Sunday, and the Revel on Tuesday. Last January, other casinos shared the cost of buying the Atlantic Club with the sole purpose of closing it down and transferring its only remaining assets to other facilities. Another 2000 people will lose their jobs in 14 days when the Trump Tower shuts its doors and turns out its bright lights.

Combining casino and hotel workers, restaurant employees, valet parkers, garage attendants, cab and limo drivers, and hundreds of related contractors and vendors, by Wednesday, September 3, more than 8200 people will be unemployed—one fourth of the total workforce inside the city limits.

So large is the expected surge of unemployment filings that the state and county will set up a mass unemployment paperwork center inside the city’s convention center, where it will operate for long hours—for weeks—until all the newly unemployed have been able to register for compensation.

All told, Atlantic City has lost four major casinos of its original roster of 12 total just this year—an unprecedented contraction in the business model of gambling. Other casinos and hotels closed last year.

Atlantic City is in a deep recession, though as some economists have pointed out, for this city built on wagers has lost its biggest gamble—that the discretionary spending of people living in states like New Jersey, New York and Pennsylvania would grow, or remain constant, and thus keep the boardwalk city’s coffers filled and the revenue stream active. Some have blamed the Great Recession for triggering the meltdown, but in fact—as business analysts have long pointed out—Atlantic City has been on a slow but steady decline since 2006, two years before the mortgage collapse. Revenue from gambling has dropped from its high level of $5.2 billion in 2006, to only $2.8 billion in 2013.

Some experts have blamed this contraction on overall economic conditions—people have less money to burn on the truly expendable act of gambling, and if they are not attracted to the casinos, business drops off for everything which runs parallel to cards, dice and wheels. But another theory says that Atlantic City—like Vegas—has become a victim of its own success. As other states legalized gambling on varying scales and in varying formats, Atlantic City no longer seemed the only attractive destination. With casinos now found in states as close as New York, Pennsylvania, Maryland, and Delaware, Atlantic City no longer had a monopoly on gambling in the northeast.

Gambling also became politically-correct, especially among state legislators strapped for cash and looking for fast streams of revenue. So as casinos began popping up in other parts of the country—from Mississippi to Louisiana, from Florida to Ohio, from South Dakota to Virginia—the competition for gambling and its many adjunct activities grew varied and diverse. Full-scale casinos were built almost entirely upon the wide and sometime elastic definition of “charitable wagering,” and dozens of states have opened up laws to allow for gambling on tribal lands. The number of full-scale casino-hotel resorts now on tribal lands has grown into the hundreds in recent years, and those casinos can be found in many unexpected locations, from Iowa to Illinois, from California to Massachusetts.

Hawaii and Utah are the only two states which currently allow no forms of gambling—meaning no pari-mutuel, no lottery, no horse racing, no charitable, and no tribal. Furthermore, traditional commercial casino gambling (corporate ownership facilities not on tribal lands) is now legal in 21 states and territories. Those who analyze such business factors say that all of that competition would inevitably put the squeeze on both Las Vegas and Atlantic City.

But there is a bright spot: many analysts say that Atlantic City’s contraction—inevitable though it was—should stabilize by next year. According to some business watchers, it was simply a case of too many casinos and not enough people gambling. Stability may return slowly as the market adjusts to the eight casinos still operating.

But for Atlantic City and its surrounding communities, the economic impact may be large and complex. A mass layoff of more than 8000 will put severe pressure on social services for the city and the state. Worse, the ripple effect could take years to correct itself as thousands of individuals and families move from the area permanently, taking with them taxes and fees, as well as spending. Many homes and apartments will be empty, and one aftereffect of such net-migration is an increase in crime. Atlantic City officials will surely struggle to keep up with the impact.


Related articles:

Stormy Waters: Sea World’s Blues; Thursday Review staff; Thursday Review; August 14, 2014.

Consumer Confidence is Rising; Thursday Review staff; Thursday Review; July 30, 2014.