Recession Resistant Industries and Why They Matter
by Kaitlyn Ranze and Lucy Koeniger
No two recessions are alike. From natural disasters or war to banks making really bad decisions about mortgages, there are a variety of factors that can precipitate a recession. And while some industries are more likely to weather the storm, others suffer. This could impact not only your investments, but also your work, especially as layoffs rise.
“Everyone’s paying attention to what’s happening in the economy right now,” says Christine Cruzvergara, chief education strategy officer at Handshake, a career network for recent grads. “Hiring managers know a potential recession is coming, and people are getting laid off. They understand that; it’s a human thing, and many have been in that boat.”
Cruzvergara recommends seeing which industries are hiring and getting creative about the kinds of roles might apply for. If you’ve been recently laid off from a tech job, you might apply to tech-adjacent roles in industries that are booming, like health care, nonprofits, and higher education.
What are the main differences between recessions? And what industries are most likely to survive a recessionary period?
First, it’s important to understand that recessions are often characterized by high unemployment, falling consumer confidence, and declining business investment. However, there are a number of factors that can contribute to a recession. Let’s take a look at some examples.
The Great Recession of 2008 was precipitated by the collapse of the housing market. This led to a domino effect, with financial institutions and investment firms losing billions of dollars. The recession had a ripple effect across the globe, with many countries feeling the pinch.
The recession of 2001 was relatively short-lived, but it was nonetheless devastating. It was brought on by a number of factors, including the dot-com bubble burst and the 9/11 terrorist attacks. It led to widespread job losses, with many people losing their livelihoods.
The recession of 1990-1991 was caused by a number of factors, including high oil prices and high interest rates. It resulted in widespread job losses and a rise in homelessness.
So knowing that no two recessions are precipitated by the same events, what are industries that tend to be less impacted?
Here are a few examples of recession-resistant industries:
This is one industry that is always in high demand, regardless of the economy. Businesses in this industry (pharmacy, hospitals, doctor’s offices) typically don’t see as big of a dip during recessionary periods.
People will always need health care regardless of the state of the economy. This means that demand for healthcare services is relatively inelastic. Unlike discretionary items such as vacations or new clothes, healthcare is something that people cannot do without. This means that even when people are tightening their belts, they will still spend money on health care.
Lastly, the healthcare sector is supported by government spending. In the US, for example, government programs like Medicare and Medicaid account for a significant portion of healthcare spending. This means that even when private sector spending is down, government funding can help to prop up the healthcare industry.
2. Grocery stores
When it comes to recession proof businesses, grocery stores and groceries are often at the top of the list. After all, people need to eat no matter what the economic conditions are. In fact, grocery stores often do better during recessions because people are cooking more at home to save money. However, there are other factors that make the grocery industry less susceptible to recessionary pressures.
For one thing, grocery stores tend to be local businesses. Even large grocery chains are usually based in specific regions. This means that they are not as dependent on the overall health of the economy. When a recession hits, people may cut back on their spending on non-essential items, but they are still going to need to buy food.
Another reason why groceries do well in recessions is that they are often able to offer lower prices than other types of businesses. This is because they have low overhead costs and can negotiate for better deals with suppliers. Grocery stores are also able to take advantage of economies of scale, which means that they can buy in bulk and get discounts that smaller businesses cannot. (One thing to keep in mind is that there is historically high inflation right now.)
While the recession has plundered many industries, education has largely been unscathed. In fact, education is often one of the first industries to rebound after a recessionary period. Here’s why:
1) Education is a necessity: People always need to learn, no matter what the economic climate is. And when budgets are tight, people are even more likely to take advantage of free or low-cost educational opportunities. They’re willing to make sacrifices in other areas of their lives in order to keep up their education.
2) Education is an investment: When people invest in their education, they are more likely to see a return on that investment. This is because educated workers are in high demand, and companies are willing to pay a premium for them.
3) Education helps people get jobs: One of the best ways to recession-proof your career is to get an education. Unemployment rises during a recession, so in order to be more competitive, they upskill. This is because educated workers are less likely to be unemployed, and they typically earn more than their non-educated counterparts.
Like health care and grocery stores, utilities are a necessity that people can’t do without. So while other industries might see a decline in business during a recession, utilities typically don’t, despite people looking for more strategies to save on utility expenses.
Other key reasons utilities seem so recession-proof?
Utilities are regulated by the government. This provides some stability for utility companies, as the government is unlikely to make sudden changes that could impact the industry negatively.
Utilities have long-term contracts. These contracts protect utilities from sudden changes in market conditions. Even if the economy takes a turn for the worse, utilities will still be able to rely on their existing contracts to keep them afloat.
So while there are many ways to save on utility expenses, they’re not avoidable.
The government is another recession-proof industry because it doesn’t rely on consumer spending to function. In fact, during a recession the government often steps in with stimulus programs and other initiatives to help boost the economy.
While there are no guarantees when it comes to recessions, these are a few industries that have historically been less impacted by them. So if you’re looking for a recession-proof career, eyeballing how you might adjust your retail investments, or just trying to predict the future, one of these might be a good option for you.