Gary Horvath is a USPTA master pro, founder and past president of the USA Professional Platform Tennis Association prior to its merger with USPTA, a certified coach with USA Volleyball and a long-standing member of the Wilson Advisory Staff. His experience as a pro has covered the spectrum from grassroots to college tennis. In addition, Gary Horvath has conducted extensive business/economic research that has largely supported Colorado's economic development efforts.
The Re-Opening of the Tennis Economy
By Gary Horvath
The U.S. economy completed the lockdown phase of the COVID-19 recession with an unprecedented decline of 22.1 million jobs in March and April of 2020. The re-opening of the economy got off to a better-than-expected start when U.S. wage and salary employment increased by 2.5 million in May.
The increase in employment resulted in a decrease in the unemployment rate, from 14.7% in April to 12.2% in May. As a point of reference, it was 3.5% in February. In addition, the labor force participation rate for Asians, Whites, Blacks, and Hispanics posted gains in May.
Several tennis industry studies reported that beginning in the second half of March, at least 90% of U.S. tennis businesses were closed. Because there are no tennis-specific indicators, it is assumed the re-opening of the tennis industry will parallel the return of the overall economy.
Table I shows the broad-based job growth in May touched every state except Hawaii and the District of Columbia. As expected, the greatest increase in employment was in the states with the largest employment base.
A review of employment increases by industry shows the sectors that added the greatest number of jobs during May lost the largest number of jobs during the lockdown. This includes accommodation and food services, construction, healthcare, retail, other (personal) services, manufacturing, and administrative (business) services.
The sectors with the greatest declines in May employment were state government education, local government, and local government education. These job losses are a result of the reduction in budgets caused by the lockdown. These sectors are an essential part of the pipeline for tennis players and coaches. Budget cuts include reduced funding for programs, facilities, and capital expenditures for parks and recreation, high school, and college tennis programs.
Table II illustrates how uneven the recovery is, with unemployment rates by state ranging from 5.2% in Nebraska to 25.3% in Nevada. Generally, the states with smaller labor forces have lower unemployment rates, suggesting they may experience a quicker economic recovery than larger states.
In addition to the increase in employment and declines in the unemployment rate, there have been gains in light truck and auto sales, retail sales, the price of oil, and the S&P 500 Index. As well, the sentiment indices also reflect increased confidence in the economy.
For example, the Michigan Consumer Sentiment Index (Chart I) shows the plunge in consumer confidence in March and April and the rebound from 72.3 in May to 78.9 in June. While the current level of confidence is down significantly from a few months ago, it is well above the values from 2008 to 2013.
Consumer confidence has been bolstered by the re-opening of the economy and the federally funded relief/stimulus programs. This increased confidence is reflected in the fact that retail sales for May were 16.8% greater than April. Consumers account for about two-thirds of U.S. real GDP.
Because there is a high concentration of small businesses in the tennis industry their optimism in the economy should be similar to the NFIB Small Business Optimism Index. Chart II shows the free fall in March and April followed by the uptick in May. The current level of optimism is greater than the period 2008 to 2014.
From a high-level perspective it is convenient to think about the re-opening and recovery of the economy as a straight line, as shown on the left in Chart III; however, the actual improvement of the economy will likely take a more erratic, but upward trending, path as shown by the chart on the right. There are a lot of moving parts that could cause the re-opening and recovery to accelerate or decelerate in the near-term.
In late July, the Bureau of Economic Analysis will release the first estimate for Q2 real GDP growth. The Conference Board has projected there will be an incomprehensibly large decline in Q2. At the same time, they have called for a strong recovery in Q3, followed by solid growth in Q4.
It has been interesting to watch organizations in various industries strategize about addressing the challenges of the COVID-19 recession. They have discussed refocusing, innovating, adapting, collaborating, re-imagining, consolidating, streamlining, and adopting a growth mindset.
Throughout the recession, the USTA has focused on providing exemplary leadership for the tennis industry. It has supported the industry by publishing resources on the USTA website to assist tennis-related businesses impacted by the pandemic, establishing a program to provide limited financial support to tennis facilities, setting up a program to retain certified teaching professionals by paying their 2021 dues, showing appreciation to USTA members by offering discounted memberships, creating efficiencies within the organization, and deciding how to move forward with the 2020 U.S. Open. In addition, the ITA and UTR have increased their presence in the industry, merger discussions have taken place between the WTA and ATP, and the differences between the USPTA and PTR have been reduced.
Hopefully, these activities by industry leaders are a sign the governing organizations are aligning their purpose with the purpose of the tennis players.
Tennis players want to play tennis. The purpose of the industry is to make it possible for them to enjoy playing the sport for a lifetime. It is that simple. Game on!