economy

Are strip clubs a good predictor of a recession?

According to those in the strip club industry, we are on the brink of an economic downturn.

ByPamela Parker KGO logo

Thursday, June 30, 2022

Strip club employees that we talked to and dancers in the business say the post-pandemic recovery they were expecting never materialized. Is the strip industry an early indicator of a coming recession?

SAN FRANCISCO -- Strip club employees who talked to ABC7 News and dancers in the business say the expected post-pandemic recovery never materialized. Some strippers are predicting a recession, with many citing empty strip clubs and poor bookings as indicators of stormy economic times ahead.

"I can speak for our dancers who work for multiple agencies and in the strip clubs because they have to get enough work and they're still not making enough money," says Asshley, (her stage name was requested to be used to protect her family) a dancer for 10 years and co-owner of SinCal Party Entertainment, an agency that dispatches strippers to events such as bachelor and bachelorette parties.

Consumer spending makes up 70% of the U.S. economy and mounting affordability concerns have impacted discretionary spending, with many consumers expected to slash spending on categories like recreation, travel and alcohol.

The U.S. saw the highest inflation in 40 years with CPI rising to 8.6 percent from May 2021 to May 2022.

"It's been bad," says Brandon, co-owner of SinCal Party Entertainment and Asshley's husband.

The couple has been in the adult entertainment business together for 10 years.

"Normally, as we come into spring and summer, it's busy for bachelor and bachelorette parties," he said. "Everybody wants to throw their parties. As the year progressed, it just hasn't happened, it has only gotten worse. It has gotten slower, where we as business owners have had to look at other forms of revenue, trying to start other businesses just to keep ourselves afloat, let alone all of our strippers. It's terrifying."

Based in California, the couple manages an agency that dispatches more than 50 strippers across the state. Many of the dancers at their agency also worked at strip clubs and have reported similar difficulties.

"You have all these girls in the strip clubs who are used to heavy traffic, that have no traffic," Asshley said. "So they're reaching out to agencies hoping that our broader net and what we serve as our service area being broader that they're going to be busier, have more work, and it is just not the case for the strip clubs and the agencies. Strippers really have taken a huge hit."

The company saw bookings drop to 50% of pre-pandemic levels since the start of 2022.

"As an agency, we really do care about every one of our strippers, we want to see them succeed," Brandon said. "But we also want to see them be able to provide for whatever their home life looks like. So for us to have no bookings, it's really hard for us because we see the direct effect that it has on our strippers."

His wife added, "When the pandemic hit, we were still one of the only things that were open. So we were making a lot of money. But then as the economy opened up more, we just saw our business hit the ground, pretty much. We had a ton of people that needed the work, but the work was not coming in."

U.S. retail sales, a measure of spending at stores, online and in restaurants, fell 0.3% in May, well below expectations of a modest increase.

This pointed to weakening consumer confidence amid surging inflation, high-interest rates and increased cautiousness in spending on discretionary items.

So are the strip clubs a good leading indicator of a recession?

A recession is defined as two consecutive quarters of negative GDP.

According to Sam Gaeta, Director of Financial Planning at Defined Financial Planning, there is a chance another negative quarter of productivity may be on the cards.

"The reason why there's there's a reduction in productivity is really driven by the Federal Reserve right now," Gaeta said. "There's been very few times in U.S. history where the US Federal Reserve has been able to raise rates and not go into a recession."

However, he says the economic world is split on whether a recession is coming.

"We need to look at all factors, we need to look at the total equation of GDP," Gaeta said. "Consumer spending is one, but we have business investment, government spending, net exports, all of those things add up to productivity in the United States."

He pointed to relatively strong fundamentals in the U.S. economy especially, in the area of employment, but worries about stagflation.

"The big concern in my mind is stagflation where we have negative productivity but we have rising costs," he said. "That's not a good recipe for especially for retirees who are drawing money from their investment portfolios. We're seeing declining investment portfolio values, increasing costs and that's not a good recipe. So that requires some planning, comparative to somebody who's working right now who might have wage increases that are supporting the increase in costs."

For now, SinCal Party Entertainment is keeping its heads above water by re-inventing its business model and creating fresh revenue streams such as offering virtual parties in the metaverse.

"We're a family-owned business - we have a 7-year-old, a 5-year-old and a 1-year-old," Brandon said. "And part of why we run a business is to be able to be home and to be involved with them. And the struggle of this post-pandemic, decrease in people's spending has really affected not just us and not just other agencies but their families. You know, a lot of the competitors that we have, are similar to us and they are also family-owned businesses and they're trying to provide for their family. And it's just not happening."