HOW MUCH U. S. EMPLOYMENT/UNEMPLOYMENT AFFECTS U. S. PARI-MUTUEL HANDLE

The U. S. Bureau of Labor Statistics reported that the unemployment rate for September 2019 was 3.5%, which is the best performance in half a century.  Moreover, the unemployment rates for women and minorities are at historic lows and real wages continue to rise for the broad swath of people in the workforce. Adding to this economic brew are low inflation and record high net worth.

What effect does employment/unemployment have on pari-mutuel handle?  Presumably, lower unemployment should have a salutary effect on spending on leisure activities and entertainment such as betting on horse racing.

One would expect an inverse relationship between pari-mutuel wagering and the unemployment rate:  the lower the unemployment rate the higher the pari-mutuel handle.  Stated differently, the correlation should be negative.

To test the correlation between the average annual unemployment rate and annual (non-inflation-adjusted) U.S. pari-mutuel handle, I ran a simple correlation analysis for the years 2000-2018.  The correlation, as supposed, was negative: -0.2522.  However, this is not the best measure because the handle dollars were not adjusted for inflation. 

To illustrate, in 2000 U. S. pari-mutuel handle was just over $14.3 billion and in 2018 it was slightly over $11.3 billion, for a decrease of 21.3%.  But in inflation-adjusted dollars, pari-mutuel handle actually declined from $14.3 billion in 2000 to $7.7 billion in 2018, or by 46.3%.

When I used “real” dollars to calculate the correlation coefficient, the result was -0.2095.

Both -0.2522 and -0.2095 are mild correlations, where the coefficient can range from plus 1 to minus 1. While correlation does not prove causality, one can infer with a high degree of confidence that the U. S. unemployment rate has had only a minor effect on U. S. pari-mutuel handle between 2000 and 2018.

Why so?  The hypothesis (educated guess) here is that the small percentage of professional-like horseplayers who account for the vast majority of pari-mutuel handle are not as affected as the proverbial $2 bettor by prevailing economic conditions.

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