What Is the NFL Telling Us About the Economy?
What is the NFL telling us about the economy?
The conventional wisdom seems to be that the economy will quickly recover once governments open things up again. But recent moves by the National Football League indicate its leadership isn’t so confident.
On Wednesday, NFL Commissioner Roger Goodell announced deep cost-cutting moves for the league, including employee furloughs and pay cuts.
“It is clear that the economic effects will be deeper and longer-lasting than anyone anticipated and that their duration remains uncertain. The downturn has affected all of us, as well as our fans, our business partners, and our clubs,” Goodell wrote in the memo. “We hope that business conditions will improve and permit salaries to be returned to their current levels, although we do not know when that will be possible,” he added.
The move is telling because the NFL is in its offseason. ESPN’s broadcast of draft coverage last week garnered record ratings. The league ostensibly shouldn’t be losing money at this time.
But Goodell’s moves indicate he expects to see significant decreases in revenue moving forward.
Keep in mind, the NFL season doesn’t start until September. That’s five months away.
Goodell clearly doesn’t expect a quick economic recovery.
Granted, how quickly governments will open up remains uncertain. There is a strong possibility that NFL teams will play games in empty stadiums. But the vast majority of the NFL’s revenue comes from television and merchandise. Goodell’s proactive moves tell me he’s expecting a protractive and deep dip in league revenues.
This makes sense when you really think about it. Even if the economy was strong going into the pandemic, it will take a long time for things to restart. Over 30 million people have filed for unemployment in just six weeks. That represents about 18.6% of the US labor force. Businesses have been shut down for weeks. Many small businesses will face significant cash-flow problems. There are high hurdles to jump before the economy returns to “normal.” Goodell knows this. Thus, furloughs and pay cuts.
You don’t have to be an economist to realize that the damage done to the economy is deep and will take a significant amount of time to recover from. It will take time to rehire millions of workers. People will be hesitant to start spending money again.
Reuters recently ran an article headlined “With confidence shattered, the road to a ‘normal’ US economy looks long.” The writer points out that the 9/11 attacks shut down airlines for three days. It took three years for the industry to recover. After the housing crash, it took five years before the balance between builders and buyers was healthy enough to revive the construction industry. The damage done to the economy over the last six weeks is far deeper than the 2008 financial crisis. Just look at the data.
There’s an even more fundamental issue. The economy wasn’t normal before the pandemic.
It was a huge bubble blown up by record levels of debt facilitated by exraordinary Federal Reserve monetary policy. Coronavirus popped the bubble. In response, the US government and the Federal Reserve have quadrupled down on the policies that blew up the bubble in the first place. This is like an arsonist throwing gasoline on the fire he set while swearing he’s putting it out. The Fed has pumped trillions of dollars created out of thin air into the economy. As Peter Schiff put it, hyperinflation has gone from the worst-case scenario to the most likely scenario with this monetary policy.
Goodell isn’t likely considering where the economy was going into this crisis. He just recognizes that an economy doesn’t come to a screeching halt and then restart on a dime. He’s making the most reasonable calculation even within a mainstream framework.
And yet the markets and the vast majority of the mainstream pundits seem to think things will quickly go back to normal. The stock markets have rallied this month, for goodness sakes. Things aren’t going right back to normal. Goodell knows it. And you should know it!