A shutdown would cost the city more than 2,000 jobs. The Atlantic Club, which employed 1,700 people, closed in January and Revel, the city's newest casino, recently declared bankruptcy for the second time with the owners saying it would close if no one buys it -- a move that would put 3,500 people out of work.
Bob McDevitt, president of Unite Here Local 54, said Caesars told him Thursday that Showboat employees were being sent letters to notify them they would be laid off in 60 days.
Caesars owns four Atlantic City casinos with Showboat being the smallest. CEO Gary Loveman suggested in May in an earnings call that the company was considering closing at least one.
"There is too much capacity in Atlantic City currently, such that the returns to existing capacity are under great pressure," Loveman said. "So we're looking at all of our options to continue to reduce the cost of doing business here, options to reduce capacity."
Showboat brings in less revenue than the other Caesars properties but had almost $2 million in income in the first quarter of 2014.
"For Caesars to close a profitable casino is a criminal act committed upon the citizens of Atlantic City," McDevitt said.
New Jersey legalized casino gambling in Atlantic City in the late 1970s in an effort to revive the city, which had been one of the best-known beach resorts in the United States. At the time, it was the only place outside Nevada with legal casinos.
Starting in 1986, when the tribal casino Foxwoods opened in Connecticut, the city has faced growing competition, including legal gambling in the Philadelphia area. Last year, gambling revenue in Atlantic City was $2.9 billion, down from a high of $5.2 billion in 2006.
A bartender at Showboat said he came to Atlantic City almost 30 years ago.
"I came looking, and I'll have to leave looking," he told the Philadelphia Inquirer.