LAS VEGAS/RENO, Nevada (Reuters) - The cracks in the labor market in Las Vegas and across Nevada have typically appeared early and widened fast when the U.S. economy soured, making the consumer-driven city and state a bellwether of sorts for the rest of the country.

By that measure, as the Federal Reserve heads towards a momentous shift to interest rate cuts this week, business owners, labor leaders, and economists in Nevada see few obvious signs of trouble. Indeed, in a state critical to the outcome of a U.S. presidential election in November that may well turn on pocketbook issues, they see plenty of evidence of an economy moving beyond high inflation without an employment-crushing recession: The Fed's longed-for "soft landing."

At a glance, Nevada's 5.4% unemployment rate, which is the highest among the 50 states and more than a percentage point above the national rate, might call such confidence into question. But that's roughly where joblessness has been for nearly three years in this southwestern state with little indication of breaking higher as it often has heading into periods of national economic turbulence.

Whether it's the steady arrival of guests eager to drop some discretionary income at the state's more than 200 casinos or a recent surge of construction hiring, "the economy is doing well, visitation is up, profits are up, and growth is up," said Ted Papageorge, the secretary-treasurer of the influential Culinary Workers Union, which represents 60,000 workers in Las Vegas and Reno casinos, hotels and restaurants.

"We've been able to negotiate the best contracts we've ever gotten" over the last two years, he said, including adding one longtime holdout, the Venetian, to the list of Las Vegas Strip casinos represented by the union, a sign of the industry's overall positive outlook.

CUTS COMING

The Fed's two-day meeting this week will mark a turning point in U.S. monetary policy, as it begins cutting borrowing costs after the last of a run of rapid rate hikes that raised its benchmark overnight interest rate to the 5.25%-5.50% range, a quarter-of-a-century high.

Analysts expect the U.S. central bank will begin its easing cycle on Wednesday with a quarter-percentage-point move, though markets are pricing in a good chance it could be a half-percentage-point cut to prevent further labor market softening.

Updated economic projections that will be released alongside the Fed's policy statement will show how much further policymakers anticipate reducing rates this year and in 2025 as they try to steer from restrictive financial conditions and towards more neutral ones. Those projections will in turn influence what consumers and companies pay to borrow money for buying a home or auto, investing in a business or making credit card purchases.

With inflation now running just about half a percentage point above the Fed's 2% target, the pace and extent of the rate cuts will hinge heavily on how officials assess the risks to a job market that has defied predictions for a major crack-up from tight Fed policy and the economic slowdown that was expected to follow.

The dynamics in Nevada show why the labor market has been so difficult for the Fed to read, and why even a rising national unemployment rate, last at 4.2% versus half-century lows of 3.4% last year, is not necessarily seen as a sign of underlying weakness.

Month-to-month job creation has slowed after the frenetic pace of reopening following the COVID-19 pandemic, but recent numbers are more in line with what the U.S. central bank feels is consistent with its 2% inflation target - a "normalization," as the Fed calls it, not a crash. Other measures of the labor market, such as ongoing claims for unemployment and layoff rates, have returned to levels seen just before the pandemic and have barely budged in recent months.

Against that backdrop, the number of people looking for work has steadily risen - a largely healthy sign that can lead to a rising unemployment rate if businesses continue hiring, just at a slower pace.

TOPPING THE CHARTS

Nevada's unemployment rate has exceeded the nation's for 17 years and has been as much as 1.8 percentage points above it over the past two years. But it has remained steady even as its labor force has grown by more than 7% since early 2022, about twice the national pace, with the local economy not only adding jobs but diversifying in the process, said David Schmidt, chief economist with the Nevada Department of Employment, Training and Rehabilitation.

"The majority of our unemployment is new entrants and re-entrants and quits and less than half from job losers," he said, evidence of a dynamic labor market, not one teetering on the edge.

While Nevada was slammed hard by pandemic-related restrictions, with an unemployment rate that spiked briefly to an astounding 30.6%, more than double the peak national rate, the state now has about 10% more jobs than before the health crisis, the fourth-largest statewide gain in the country. National payroll growth since February 2020, by contrast, has been just over 4%.

There were alarm bells earlier this year when Tesla laid off hundreds of workers, contributing to a stall in what had been steady growth in manufacturing jobs. But as has happened nationally throughout the pandemic recovery, other sectors like construction took up the slack.

Nevada's higher unemployment rate "is due to people looking ... as opposed to being forced out of a job," Schmidt said.

Businesses across Nevada say conditions remain strong, while workers say they remain mostly concerned about housing and other costs - not about job security.

"We're kind of cruising," Kristie Strejc said. The veteran bartender at the Circus Circus casino in Reno has a smaller staff than before the pandemic but a steady flow of business.

As president of the Reno Aces minor league baseball team, Eric Edelstein is also in an industry dependent on consumers carving money out of their budgets for non-necessities.

The money is still flowing.

"We have a larger, more raucous, higher-spending fan base than we had pre-pandemic," he said. Renewals of corporate sponsorships and season tickets for next year's baseball season are running even with or slightly higher than for this season.

"I've been waiting. Is a shoe going to drop? We haven't seen it."