Now I know recession is close at hand. When the purveyors of sex, drugs, and cheap thrills hit the skids - you know the rest of the economy can’t be too far behind. America’s most outrageous city, Las Vegas, is facing a growing multitude of problems, and they all boil down to a single, unavoidable point: what happens in Vegas isn’t enough to pay for Vegas.

With Americans cutting back on luxuries, and the price of gasoline and airline tickets rocketing, the so-called “Vegas vacation” is facing the axe. This week, as the nation celebrated Independence Day, major hotels were taking stock of a fall in all-important room occupancy rates from their usually impressive 95 per cent levels to nearer 80 per cent. More worryingly, new figures showed gambling revenue has also dropped – a further 3 per cent this month – starting a price war between worried firms anxious to lure punters back. Hotel rooms, which last year averaged $130 each, now go for less than $100.

To quantify the Vegas slump, look to the stock market. Shares in casino operators, the engine room of an economy reliant on its liberal attitude to public morality, have been losing value like a down-on-his-luck gambler down to his last dollar.

Las Vegas Sands, which controls the Venetian and Palazzo resorts on the famous “miracle mile,” has dropped below $50 a share, a third of its value last September. MGM is at $28, down from over $100 a year ago. Wynn resorts, owned by billionaire Steve Wynn – neared $70, from almost $180 last year.

This week, in an attempt to prevent financial meltdown, Nevada’s Tourism Alliance convened an “Air Crisis Briefing” in an effort to prevent airline plans to halve the number of flights to the resort. However, with the airlines struggling to just stay solvent - it is unlikely that they’ll have cheap flights to destinations like Vegas.

The city’s gut-busting “eat all you can” buffets are also being scaled back to account for the US’s 4 per cent food inflation. Where a long queue of obesity once trailed across The Bellagio hotel restaurant’s ornate carpets, demand for its famous (but now pricey) lunch buffet had on Thursday slowed to a trickle. In what sounds suspiciously like a panic measure, the Golden Gate Hotel this month even said it was doubling the price of its signature 99 cent shrimp cocktail.

For the locals of Las Vegas, the downturn is no joking matter. The growing unemployment crisis, MGM just axed another 400 middle-managers and more layoffs are on the way, plus a downturn in the tips that form a significant portion of the Vegas economy, is driving down the local economy and leading to a massive swing in the economics of the once thriving desert suburbs.

Local bankruptcies have quadrupled. The property market, which rode the wave of a boom for most of the past decade is now below its peak by anything from a quarter to a third (depending on whose figures you believe), while Nevada now boasts, if that is the right word, the nation’s highest foreclosure rate.

“The current rate of overall unemployment in this state is 6.2 per cent, the highest since May 1994,” said Jered McDonald, an economist with the Nevada Employment, Training and Rehabilitation Department. “Las Vegas seems to be getting the worst of it. Other parts [of the state] aren’t so bad; in fact the gold-mining industry is booming, so the drop in employment in big metropolitan areas is actually bigger than that figure suggests.

“With the high oil prices, people don’t have much disposable income to spend on gaming and entertainment. So we are looking at a short-term slump, certainly. In the longer term, everything depends on what’s going to happen to oil prices.”

And speaking of unemployment, apparently the hookers are having a hard time of it as well. “This year already we’ve seen the Minx closing, the Mensa club closing, and the Crazy Horse closing,” says Dolores Eliades, owner of the OG, the second biggest “adult cabaret” venue in the world. “By another 12 months from now, I expect another two or three major venues will have gone.

“We’ve seen a drop in custom here too: maybe 180 people coming in when before we got 200. It’s a difficult business, but the girls still have to make a living. We will survive because we own our own premises, we have a good name and location, we don’t buy on credit, and we’ve been around for a long time. But we’re very lucky in that respect.”

Dolores Eliades says the history of Las Vegas shows it will find a way to adapt and survive. “Historically, Las Vegas is able to withstand the problems of the rest of the country. When people face hard economic times, they come here to get away from their problems. In the US, people are escape artists, and they deal with problems a little differently from the rest of the world. I believe the history of this town proves I’m right, I really do.”

Historically, California and Nevada have always been at the tip of the pendulum in the economic swings - much higher than the rest of the nation when the highs are “high” and much lower, when the lows are low.

It all spells bad news for Vegas. I’ll tell you this much - what happens in Vegas, probably won’t probably stay in Vegas when they stop paying their bills.