Economics in the USA

Economics in the U.S.A. -- The Gambling Industry

Industry Overview

The bases of the gambling industry were set by the former mafia clans, during a time in which the United States authorities were militating for a decent life style and a religious focus. It was probably the simple interdiction of gambling activities that made them so appealing and popular with the public. As they became legal, the mafia lost interest in them and sold most of the casinos in Las Vegas. Today, the gambling industry is not only legit as any other industry, but it has come to generate million dollar revenues each year.

More specific information on the American gambling industry sees that its growth has been due to increases in the population's living standards. The successful outcome of any casino in the United States is directly linked to its ability to conduct efficient operations as well as develop and implement the most suitable marketing strategies. The large players benefit from increased financial and technological resources to sustain revenues and the small size players succeed by addressing local markets. The average income for an employee in the industry is of$90,000 per year. 2008 was market by a 7% increase in the industry's operations and revenues, but 2009 reveals pessimistic results due to the internationalized economic crisis. However, a one percent growth is still expected. The growth rate is expected to gradually increase and measure 7% by 2011, but it then foreseen that during 2012 it will only be of 5%, to then increase once again throughout 1013 at 6% (Hoovers, 2009).

2. Economic Indicators and their Impact on the Gambling Industry

Economic indicators include a series of statistical information used by specialized economists to review the performances of a given economy, industry or sector. Aside assessment, economic indicators also allow for the making of future estimations. The most relevant economic indicators to be mentioned in the analysis of the gambling industry are the gross domestic product, the unemployment rate, the inflation rate (or the consumer price index), personal income, interest rate and finally, the PPI, or the producer price index.

2.1 Gross domestic product

The GDP is defined as the totality of products and services produced or delivered within one country during the course of one year. The products and services are understood in terms of their monetary value and the GDP is "equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports" (Investor Words, 2009).

The gross domestic product within the United States has followed an ascendant trend for the past decades:

Source: The Financial Forecast Center, 2009

Foremost, despite the financial crisis in the contemporaneous community, the American GDP is expected to maintain its ascendant trend in the future. The biggest increase is expected to occur in November 2009.

* The charts are constructed on estimative forecasts from the Center for Financial Forecast

An analysis of the gross domestic product in most of the American industries will only manage to reveal font modifications. However, in terms of the gambling industry, modifications in the GDP are directly linked to the evolution of gambling. In this order of ideas, increasing GDP means that more services and products were delivered in the United States and that the incomes of the individual customers increased. This in turn means that the customers have increasing purchasing powers and that they are more likely to contract the services of gambling organizations. On the other hand, a decreasing GDP means that the population is less able to purchase gambling services and that the revenues of these institutions are likely to decrease.

2.2 Unemployment rate

In defining the unemployment rate it is necessary to distinguish between the individuals in one country. To better understand, the labor force is made up from individuals who work and those who do not work, but are looking for jobs and are willing to work. The unemployment rate is the numeric representation of the category of individuals who do not currently work but are looking for jobs. The category of individuals who are able to work -- but who do not work neither look for a job -- is not included in the unemployment rate. Sadly enough, the unemployment rate within the United States has increased during the past few months as a direct result of the economic crisis. It is also expected to further increase in the near future.

Source: The Financial Forecast Center, 2009

Increases in unemployment rate mean that the gambling industry will be faced with fewer customers. This in turn will materialize in reduced sales and profits. If the situation continues to aggravate in the years to come, several players in the gambling industry might have to close their casinos. One must also notice the exceptional situations in which out of job individuals will gamble in the hope of winning some money. However, these instances are reduced and not able to modify the indirect relationship between the evolution of unemployment rate and demand for gambling services. Vice versa, when the unemployment rate decreases and the population enjoys more sources of revenues, the demand for the services of casino clubs increases.

2.3 Inflation rate (consumer price index)

The inflation rate represents the "percentage increase in the price of goods and services, usually annually" (Investor Words, 2009). Within the United States, the economic indicator has maintained a relatively stable trend, with insignificant fluctuations from one year to the next. 2008 has however commenced with a dramatic fall in the inflation rate and 2009 continues in the same path. For the future months however, it is expected that the interest rate increase.

Source: The Financial Forecast Center, 2009

When the inflation rate increases, the population is less able to satisfy its purchasing needs. This then means that a growth in inflation will negatively impact the financial results of the gambling institutions. Additionally, the players in the industry themselves will be faced with reduced purchasing power, meaning that their operating costs will increase and their ability to invest in the development of their organizations will also decrease. On the other hand, a decrease in inflation rates generates the opposite effects by increasing the purchasing power of both customers as well as economic agents.

2.4 Personal income

The personal income encompasses the totality of revenues registered by on individual throughout the course of one year and it is composed of all sources of income, including wages, pensions or revenues from investments. Throughout the recent decade, the trend has been an ascendant one, but the contemporaneous financial crisis might materialize in reductions in the personal income. Despite these reductions however, the economy is likely to pick up and generate increases in personal income starting with the end of 2009.

Source: iCharts, 2009

Increases in personal income will materialize in increases in customer demand and gambling revenues; a reduced personal income will have the opposite effect.

2.5 Interest rate

In the most simplistic formulation, the interest rate represents "a rate which is charged or paid for the use of money" (Investor Words, 2009). The distinguished trend throughout the past years has been that of a massive relaxation in crediting conditions and an increase in interest rates with the purpose of increasing the levels of consumption and stimulating economic progress. The effects were however more damaging than initially estimated and the current trend is that of decreasing the interest rates on borrowed money.