Last week, we explored the challenges that the COVID-19 coronavirus poses to our physical health. Today, we look at the other threat coronavirus poses: the threat to our economic health. Here’s what we need to know about how coronavirus is making our economy sick(er), and what we’ll need to do to get our economy on track for better health.
What’s the “Canadian Connection”?
Last week, Nevada got some jarring news on the spread of coronavirus into our state… And from our state. Closer to home, the first two patients tested presumptively positive for COVID-19: One who’s been treated at the VA Hospital in North Las Vegas, and another in Reno who had recently traveled on a cruise ship.
Then last Friday, another big story dropped, this time from the other side of the continent and the Great Lakes. The Ontario (Canada) Ministry of Health confirmed six new Toronto area cases of COVID-19, including that of one individual who developed symptoms after travelling to Las Vegas for a convention. When asked by the Nevada Current’s Dana Gentry about this Toronto patient, Southern Nevada Health District acting chief health officer Fermin Leguen replied, “The CDC has to [communicate with Canadian health officials]. It’s a different country. We can’t do it.”
Leguen was on his way to a press conference with Governor Steve Sisolak (D). At that press conference, Sisolak sought to reassure residents across the state that they have this coronavirus situation under control. Since then, two more Nevadans have tested presumptively positive for coronavirus: another in Washoe County, and another in Clark County.
Why is this “Canadian Connection” such a big deal?
Let’s head back to Toronto as we try to make sense of these recent developments. This individual reportedly attended a convention here in Las Vegas, probably one of four international trade shows. All you have to do is peruse the convention calendar to see how these conventions keep our economy humming, but let’s dig deeper to better understand why this is such a big deal.
According to a June 2019 Applied Analysis report for the Las Vegas Convention and Visitors Authority (LVCVA), Southern Nevada’s tourism industry contributed $57.6 billion in total output, supported about 367,900 jobs (or 41.9% of all private employment in the region), and generated $15.7 billion in wages and salaries in 2018. More specifically, convention visitor spending directly supported 42,800 jobs, $1.9 billion in wages, and total output of $6.3 billion in Southern Nevada in 2018.
According to a January 2019 Applied Analysis report for LVCVA, the tourism industry employs 29.9% of Southern Nevada’s workforce. That’s more than double the 13.5% average for major U.S. destinations. And as we’re reminded every time we tune into the Nevada Economic Forum, the gaming and tourism industry plays an outsized role in generating tax revenue and funding state government. This, in turn, means that Nevada’s economy is probably more vulnerable to outside influences, whether they be foreign anti-corruption crackdowns or a growing global pandemic.
Coronavirus won’t kill Nevada, but it’s already slowing Las Vegas down.
Let’s just say I have a source who’s been employed in the tourism industry. For the last ten days, this source has expressed frustration over multiple conventions being cancelled up and down the Las Vegas Strip. For now, our source has to go off-Strip and do lower-paying local gigs because business is drying up on the convention circuit.
This lines up with a recent Reno Gazette-Journal story detailing how coronavirus is affecting our economy. Usually, about 20% of MGM Resorts’ Las Vegas hotel rooms are booked for conventions. But in the wake of multiple conferences and conventions being postponed or cancelled, average Las Vegas hotel room rates have already dropped 10% in recent days. And as we peruse Expedia hotel listings, we’re seeing some Strip properties cut their prices by as much as 25% to fill vacancies.
Typically, lower hotel prices are among the first signs of a tourism slowdown. We’ve seen similar drops in prices and hotel occupancy in late 2001 (as in, right after 9/11) and 2008 (just as the Great Recession was taking hold). And considering that 20% of Las Vegas’ visitors travelled from abroad in 2018, the travel restrictions that have already taken hold in China, Italy, Saudi Arabia, South Korea, and elsewhere are virtually guaranteed to reverberate here in Nevada (even if such travel restrictions have been futile in containing COVID-19’s global spread).
Oops, she had a plan for this, too?
Following her disappointing showing in our Nevada Caucus and little improvement on Super Tuesday, U.S. Senator Elizabeth Warren (D-Massachusetts) dropped out of the presidential race. Yet despite her exit, Warren’s ideas and plans for “big, structural change” may continue to influence the campaign.
Last July, Warren specifically warned, “Our country’s economic foundation is fragile, and a single shock could bring it all down. [President Donald] Trump’s reckless behavior makes that shock more likely. Financial markets and experts agree: We face a serious risk of another recession by the end of 2021—maybe even by the end of 2020.”
Whew this guy. https://t.co/Jj90yyyHwb
— Soledad O'Brien (@soledadobrien) March 9, 2020
Warren also pointed to several of her signature plans, including those to raise Americans’ wages and reduce household debt, better regulate corporate debt, invest in American manufacturing, and end the practice of “governing by crisis, by way of shutdown sh-tshows”. Considering Trump’s current approach of catering to wealthy stock owners while downplaying the public health risks of COVID-19, Trump seems to be doing his darndest to fulfill Warren’s warning.
As Vox’s Matthew Yglesias recently noted, cutting interest rates (again) will likely do little to counter further coronavirus-induced economic harm, yet Trump and his leading financial advisers are continuing to pressure the Federal Reserve to further cut interest rates. We really need more short-term fiscal stimulus and long-term economic restructuring to better handle this and future crises. As we know all too well here in Nevada, “easy quick fixes” can only deflect and distract from the underlying problems for so long.