PTR-AdR2.jpg
TCB Extreme Banner.jpg

The Tennis Economy is Officially Back

By Gary Horvath

Overview

As the pandemic lockdown restrictions were lifted in May and June, the U.S. economy roared back. The hustle and bustle on the roadways returned and teaching professionals were again performing their magic on the courts.

 

This analysis briefly evaluates how the economy and tennis industry have bounced back and what to expect in the months ahead.

 

Real Gross Domestic Product

The quarterly real GDP is the most comprehensive indicator of the economy because it measures personal, business, and government spending, in addition to net exports.

 

Personal consumption accounts for about two-thirds of real GDP. During the lockdown workers were laid off, businesses and tennis facilities were closed, and personal consumption was reduced. This trifecta of events presented a series of challenges for the economy and the tennis industry.

 

With the recent chaos, it is easy to forget that 2020 started on a positive note. Sadly, the lockdown in March and April offset the solid growth in January and February.

 

As a result, the third estimate of real GDP for Q1 was -5.0% and personal consumption was -6.9%. The projected decline in Q2 real GDP and personal consumption will be about 40% (The Q2 first estimate will be released on July 30).

 

On a positive note, real GDP growth will rebound by 20% in Q3. There are concerns the number of COVID-19 cases will cause the rate to be flat in Q4.

Wage and Salary Employment, and the Unemployment Rate

U.S. wage and salary employment plummeted by 22.1 million during March and April. It bounced back during the reopening (May and June) with employment gains of 7.5 million. About two-thirds of the increase occurred in June.

 

Table II shows the recovery in employment has been uneven across the country. For example, current Utah employment is 95.8% of the 2019 year-end value compared to 84.6% for New York. Many smaller states (less than three million employees) appear to be recovering more rapidly than states with larger employment (greater than three million employees).

StonesNet-032020.jpg

In June, the U.S. unemployment rate dropped to 11.1%. Table III shows that 30 states and the District of Columbia (DC) had rates less than 10% (green). By comparison, only 17 states plus DC had rates less than 10% in May.

 

Many larger states have metro areas with high unemployment rates that are stifling the state’s growth. For example, Los Angeles has an unemployment rate of 19.1% and Salt Lake City has a rate of 9.4%. Los Angeles is a significant drag on the California economy, whereas Salt Lake City is less of a drag on Utah.

The takeaways for the tennis economy are obvious. Tables II and III suggest the tennis industry should enjoy a faster recovery in smaller states and states with lower unemployment rates.

 

Performance of Other Industries and Sentiment Indices.

A look at the reopening in other industries is generally optimistic. Light truck and auto sales have exceeded expectations, retail sales for June 2020 topped the value for the prior year, the price of oil has remained around $40 per barrel, and the S&P 500 Index has rebounded to its pre-pandemic level.

 

The most recent purchasing manager indices for manufacturing and nonmanufacturing are in expansionary territory. Only the Michigan Consumer Sentiment Index showed a slight downturn in July. This is attributed to concerns about the reported number of COVID-19 cases.

 

Chart IV shows the free fall in the NFIB Small Business Optimism Index during the lockdown followed by the uptick in May and June. As a point of reference, the current level is greater than the period 2006 to 2017.

 

The combination of economic data from other industries and anecdotal evidence from the tennis industry is encouraging.

Headwinds
This section touches on three major headwinds facing the recovery in the months ahead: COVID-19 policies, constrained operations, and funding for state and local governments.

COVID-19 Policy - Since March, business, political, and medical leaders have had the unenviable task of developing policies that balance the risk between the health of Americans and the country’s economic vitality. These policies have been based on limited epidemiological knowledge about COVID-19, imperfect data, and errant forecasting models.

 

In the near-term, the implementation of COVID-19 policies will continue to be a source of change, contention, uncertainty, and politicization. Intense debates will be held about the return of education, sports and arts, and the hospitality and travel industries.

 

On a positive note, pharmaceutical companies are reportedly making progress in the development of treatments and vaccines. These medical advances may partially offset the headwinds.

 

Constrained Operations - Since March, policies have been implemented that jeopardized the financial well-being of businesses and consumers.

 

Some businesses were required to close. Others were forced to operate with a constrained business model. For example, restrictions on many tennis businesses reduced revenue streams and productivity, while increasing expenses.

 

The pre-pandemic evolution of industries, such as retail trade, has been accelerated by COVID-19 policies.

Fortunately, tennis players enthusiastically returned to the courts when restrictions were eased in May and June. Restaurants, hotels, and air travel have experienced a much lower level of support.

 

Most businesses will survive; however, the 2020 lockdown shortfall will negatively affect their long-term operations. In some instances, federal support programs and policies have partially reduced the impact on businesses and consumers.

 

The uneven improvement across industries and regions will extend the recovery of the overall U.S. economy.

 

State and local governments - The pandemic caused budget cuts in state and local governments that included essential services as well as parks and recreation, high school, and college tennis programs.

 

In May and June, the Aspen Play Project released reports expressing concerns about parks and recreation and high school programs. At that time, about 31% of parks and recreation departments had already cut their 2020-2021 fiscal year budgets. NFHS leaders were worried that sports would get cut because many high schools expected budget reductions between 20% and 50%.

 

In addition, at least 45 college programs have been eliminated despite the advocacy efforts of the ITA.

 

Next Steps

Working through the recovery is like playing one of those players that nobody likes to play – the human backboard. It is necessary to remain persistent and patient.

 

It is important to be safe and healthy. At the same time, it is also essential to ensure the vitality of the U.S. economy and tennis industry. Leaders must continue to find new ways to conduct business and enjoy tennis in a safe environment.

 

The lockdown has served as a reminder that sports are an important part of the American culture. Playing tennis is like taking a mini-vacation. For 90 minutes it is possible to substitute the woes of the world with a win in a third-set tiebreaker.

 

For those in the industry, tennis is their profession. For those who play tennis, the sport is life at its finest.

 

See you on the courts!

© 2020 by Tennis Media Group, 4324 Troost Ave, Suite 302, Studio City, CA 91604, U.S.A.  Tel 818-809-8327  info@tennismediagroup.com

  • Rich Neher Facebook
  • Rich Neher Twitter