Will Baseball Trigger The Next Positive Economic Swing?

No one is suggesting that baseball box scores should flash on the floor of the New York Stock Exchange. But who would have thought baseball would become a leading economic indicator?

One baseball-themed sign that things may be amiss in the national economy was the New York Yankees readying their new billion-dollar stadium for the upcoming season. By August, seven ultra-luxury suites along the foul line priced at $600,000 apiece remained unsold. By November, those suites at the New Yankee stadium were still unsold. While team spokespeople refused to confirm any trouble, they did admit that demand for luxury suites was down. This couldn’t have been a good sign.

As a microcosm of the country, the freewheeling salary-capless world of Major League Baseball has worked for over a decade. The bulk of the larger contracts—and much of the on-field success—lay among bigger-market teams like New York, Chicago, and Boston. But the smaller, struggling cities host teams forced to do more with less.

Take the city of Pittsburgh, which verged on bankruptcy at the beginning of this decade while its cash-strapped team, the Pittsburgh Pirates, was in the midst of a historic streak of futility. Today, with Detroit among the cities hit hardest by the current financial crisis, the hometown Tigers are working to slash a team payroll that last year was the second-highest in all of baseball. Perhaps not surprisingly, the man largely responsible with bringing the small-market Tampa Bay Rays to the World Series, Executive VP of Baseball Operations Andrew Friedman, used to be an analyst at Bear Stearns.

But baseball as an economic indicator may not always mean a positive correlation. Two Pennsylvania economists at Moody’s Economy.com expressed fears about the economy in October. Their motivating factor: their hometown Phillies possibly winning the World Series. According to Ed Friedman and Ryan Sweet, after the Phillies’ last World Series win in 1980, national unemployment rose from 8% to a peak of 11%. The last Philadelphia World Series before that was won by the then-Philadelphia Athletics, whose victory sent unemployment skyrocketing during the depths of the great Depression. In their analysis, they conclude “the data strongly suggest that a Philadelphia Phillies victory in the current World Series spells bad news for the economic cycle. Although the precise transmission mechanism for this phenomenon has yet to be articulated, the correlation seems clear.”

Even little-known Major Leaguers see a correlation between baseball and the economy. Last August, when Tampa pitcher Trever Miller got a win after going a record 121 consecutive appearances without a decision, he predicted great things for the economy. “I think the housing industry could be blamed on me not winning any games because that’s when it started to turn,” he joked. “Trever Miller got a win, so everything’s going to turn around for us.” And that’s why he’s a baseball player.