Economic Slowdown 2025?

Is Chicken Little Right about the United States Economy?              

If Chicken Little presented a forecast today, it would say, “The sky is falling, we are going to have a recession, and possibly a depression that will make the Great Financial Crisis of 2007 to 2009 look like a church picnic.”

The Chicken Little Story

Chicken Little was standing under a tree when an acorn fell and hit him on the head. He panicked, then convinced his friends that the sky was falling and they should tell the King immediately. As the group traveled to see the King, they met Foxy Loxy, who convinced them to visit his den. Sadly, the story ended in a tragic way that Chicken Little had not anticipated.

The moral of the story is:

• Get the facts.

• Think critically.

• Be forward-thinking, but avoid jumping to conclusions.

• Only share credible information.

These words of wisdom are essential in dealing with economic change – and life.

NBER and Criteria for a Recession

The National Bureau of Economic Research (NBER) determines when recessions occur in the United States.

The group was established in 1920 by economists Malcolm Rorty and Nachum Stone. They had opposing viewpoints on many economic policy issues. Their common ground was the need for additional research to foster educated discussions about the United States economy.

The NBER Business Cycle Dating Committee was formed in 1978 to determine recession dates and criteria. While many people have opinions about when a recession will happen, NBER has specific criteria for determining the peak and trough of each recession. They formally determine the dates of recessions – not MSNBC, Fox News, or Chicken Little.

NBER is NOT a governmental agency, nor is it a policy-making organization. You can learn more about NBER and the history of United States recessions at https://www.nber.org/about-nber/history.

The United States Economy - Q1 2025

There are hundreds of thousands of datasets that measure economic performance. The following headline metrics suggest the United States economy had a solid foundation in Q1 2025.

• Over the past year (April 2024 to March 2025), employment increased by about two million, or an average of 166,000 monthly. The labor market will remain solid for the remainder of the year and average 125,000 to 150,000 monthly.

• Retail sales through February were 4.1% greater than during the same period of 2024.

• The February personal savings rate was up to 4.5%.

• Consumer Credit through February was down by 1.0%.

If there is a recession or a downturn, the silver lining is that consumers will enter it in a better position than a year ago.

Economic Projections for 2025 and 2026

The following annual projections by The Conference Board (TCB) provide a forward-looking take on the economy. TCB calls for growth in economic activity in 2025; however, the individual metrics were reduced significantly over the past four months based on the uncertainty surrounding federal policies.

• Real GDP growth will drop from 2.8% in 2024 to 1.6% in 2025, then increase to 1.7% in 2026.

• Real personal consumption growth will fall from 2.8% in 2024 to 1.7% in 2025 and 1.5% in 2026. Consumption is the primary driver of the economy.

• Government spending will slow from 3.4% in 2024 to 2.1% in 2025 and 0.2% in 2026. Slower government spending will still support economic growth.

• PCE Inflation will increase from 2.5% in 2024 to 2.9% in 2025 and 2026. The slight increase will be far below the accumulated inflation rate between 2021 and 2023.

Sentiment Surveys for 2025

Sentiment surveys are a popular tool for measuring the opinions of business leaders, consumers, and investors about the economy. Recent surveys show that leaders of companies say they are losing confidence in the economy, investors are talking about reducing their risk in equities, and consumers are concerned about their employment.

Sentiment surveys provide interesting information. They accurately reflect what people say. More importantly, they may not measure how people will act.

Will There Be a Recession?

The answer is “Yes.”  The timeframe, severity, and duration are yet to be determined.

The data through Q1 2025 shows the economy has slowed and suggests a recession is unlikely. The TCB forecast shows a more severe economic downturn. A recession is possible based on their projections. The sentiment surveys say a recession is on the horizon.

Many economists thought the United States would experience a recession in 2022 and 2023. It did not happen. Will 2025 be a repeat performance, or will there be different results this time?

How would you answer the following questions?

• What is your call for a recession in the next 18 months?

• Will you use the actual headline data, the TCB forecast, the sentiment surveys, a combination of the above, or your favorite data collection?

• How will the tennis industry fare if there is a recession or downturn?

It is a challenging task to collect information and correctly forecast recessions!

On The Courts – At the Top

Historically, tennis at the top has been somewhat immune to recessions or economic downturns.

Past experiences guide what is likely to happen at the 2025 U.S. Open.

• There will be a minimal impact on attendance at the U.S. Open. The primary target market includes attendees in higher income brackets.

• Tournament directors will ensure that a certain number of tickets are “affordable.”

• The substitution effect is applicable. Attendees may stay at less expensive hotels, eat at less formal restaurants, or have a shorter stay.

• Attendees may forego the event for 2025 and watch it on television.

• Television viewership may increase if fans cannot afford to attend.

• Some companies may reduce their advertising and sponsorship budgets; however, companies still have to advertise, and the U.S. Open provides excellent exposure.

• Sponsors of smaller professional events and local amateur events may experience reduced advertising and sponsorships.

On the Courts – C+I+G+X

The forecasted data in the previous table provides projections about how the tennis industry might change in 2025 and 2026. It shows the GDP will increase at a much weaker rate. To understand the impact of slower growth on the tennis industry, consider the components of the GDP.

When projected growth increases at a slower rate, it means that:

• Tennis-playing consumers will likely reduce tennis-related expenditures. Personal Consumption accounts for about 70% of GDP.

• Expenditures by 30% of the tennis population that play at clubs may not decline – they are more affluent. It is more likely to affect the 70% of players who use park facilities or school courts. They may postpone the purchase of a new racquet or lessons. Ultimately, these changes in behavior will cut into revenues received by teaching professionals.

• Players affected by economic conditions may not play as frequently.

• In the private sector, there will be less business investment in facility maintenance or improvements. Facilities will have less money to build new courts.

• State and local governments will have less funding to support schools, higher education, parks, and recreation sports programs and facilities. Industry data shows that 70% of players enjoy the sport at high school and park facilities.

• A contraction in tennis activity at colleges, high schools, parks, and recreation facilities will not receive appropriate attention. Unfortunately, these activities are not viewed as mainstream activities because most certified professionals do not teach in these market segments.

Due Diligence, Research, and Chicken Little

When Rorty and Stone formed the NBER, they had different economic philosophies. More importantly, they emphasized the importance of due diligence, research, and learning from different viewpoints.

The previous evaluation of historical data, economic projections, and sentiment survey results illustrates how economic analysis can tell many different stories.

This approach is much different from the Chicken Little approach to economics!

When addressing economic issues and policies (and life), it is necessary to:

• Get the facts.

• Think critically.

• Be forward-thinking, but avoid jumping to conclusions.

• Only share credible information.

Downturns and recessions are not fun! At the same time, they usually provide industries, companies, and people with an opportunity to evaluate their situation, create new efficiencies and competencies, and come back stronger.

It is going to be a wild ride. Buckle up and enjoy the adventure!

In addition, Gary Horvath has conducted extensive business and economic research that has largely supported the state of Colorado's economic development efforts.