5 Industries That Have Withstood the Recession
What skills are recession-proof?
8 industries with the best job security during a downturn
- Health-care services. People get sick and require medical care regardless of the state of the economy, thus the demand for health-care occupations is fairly stable, even during a downturn.
What makes a business recession-resistant?
- During market downturns, investors who can correctly identify companies that are recession-resistant have a chance to profit.
- Companies that are not recession-proof may have cash flow issues, forcing them to lay off workers, cut spending, and take on debt to stay afloat.
- Companies that are recession-proof will have consistent revenue streams regardless of the state of the economy.
- Companies that provide consumer necessities, provide crucial maintenance services, develop unique items, or provide mandatory services are examples of such businesses.
What business is recession-proof?
Healthcare, food, consumer staples, and basic transportation are examples of generally inelastic industries that can thrive during economic downturns. During a public health emergency, they may also benefit from being classified as critical industries.
Is the utility industry recession-proof?
Companies that provide utilities. During recessions, demand for energy, water, waste collection, and natural gas remains generally stable, even when firms close and people lose their jobs. As a result, utilities and utility-like businesses generate relatively stable earnings even during downturns.
Medical professional
Within the medical field, there are numerous vocations and specialties. This group includes Registered Nurses (RNs), pharmacists, physicians, surgeons, paramedics, dentists, dental assistants, and even veterinarians. People and animals become ill regardless of the economy, thus they will always require the assistance of trained professionals.
Specialized care, therapy, and counseling
Consider elder care, physical therapists, occupational therapy, substance-abuse counseling, chiropractic treatment, home health aides, mental health specialists, social workers, and other professionals who operate in this field. People place a high importance on their health. They will spend money on services that will help them to be productive while also being pain-free. Some of these services are covered by insurance, encouraging consumers to use them even when they are short on cash.
Law enforcement officers
The specific link between crime and economic cycles is difficult to pin down. Some crimes predict a downturn, while others coincide with it, and still others show no link at all. Communities prefer to invest in physical safety for local companies and citizens in any economic scenario, which means that police officers and the professionals who support them are in high demand even during a downturn.
Public utility services
During economic downturns, electric, water, sewage, waste, trash, and recycling services all continue to operate. Utility personnel, after all, are essential to ensuring public order and health. Surprisingly, consultants that serve those utilities appear to get the same benefit. Many cities, for example, are obligated to undertake annual audits of their trash-collection companies. Even in a down economy, consulting businesses that undertake such audits will have work to do.
Financial services
The importance of money mobility explains why financial specialists are always in demand. Accountants, auditors, actuaries, claims adjusters, tax preparers, and insurance underwriters are just a few of the employment available in the financial services industry. Many jobs necessitate professional certificates such as Enrolled Agent (EA), Certified Public Accountant (CPA), or Certified Financial Analyst (CFA) (Chartered Financial Analyst).
Education services
Economic booms come and go, but putting money for the future is always a good idea. Regardless of the economy, jobs in primary education, secondary school, higher education, special education, and adult education are in high demand. Those interested in following this path should be aware that the method education is given is changing. New types of distant and on-demand education are becoming more relevant in addition to traditional classroom educators. As a result, a teaching career might be flexible in terms of both location and delivery manner.
Looking for a job that is recession-proof? A skilled resume writer can reframe your experience in order to help you advance in your job.
In a downturn, how do you make money?
During a recession, you might be tempted to sell all of your investments, but experts advise against doing so. When the rest of the economy is fragile, there are usually a few sectors that continue to grow and provide investors with consistent returns.
Consider investing in the healthcare, utilities, and consumer goods sectors if you wish to protect yourself in part with equities during a recession. Regardless of the health of the economy, people will continue to spend money on medical care, household items, electricity, and food. As a result, during busts, these stocks tend to fare well (and underperform during booms).
During a recession, what jobs are at risk?
The advent of artificial intelligence and automation will coincide with the next recession, putting all occupations that a computer or robot can do faster and better in jeopardy. “If organizations can utilize cheaper software and robotics to complete tasks faster and more correctly, it will surely effect people’s job security,” says Yaniv Masjedi, chief marketing officer of corporate communications provider Nextiva. Jobs in manufacturing plants, secretarial functions, inventory management, and responsibilities in the food preparation and service business are among the most susceptible, according to Masjedi. “Because these tasks are highly repetitious,” Masjedi says, “automation can replace such a workforce with robots that can duplicate the movements with 99 percent accuracy, greatly lowering the danger of failures and error.” “Health crises like as pandemics have no effect on robots or software programs, making it an even more realistic alternative for corporations that wish to maintain operations without endangering anyone’s health.”
What are two recession-proof items?
At least one of two main concepts governs recession-resistant enterprises. Both are used by some of the most stable and profitable industries.
- The given product or service is a less expensive alternative to another product or service.
- The product or service given is a necessity that cannot be avoided.
Let’s take a closer look at the two elements that make certain sectors recession-resistant.
Low-Cost Alternatives
In a circumstance when consumers must spend less moneyeither because it is difficult to obtain work, their income is stagnant, or other prices are risingconsumers will seek out low-cost alternatives to save money. This is why organizations and sectors that have a low-cost competitive edge fare better during a downturn.
Discount Stores
Only 25 equities in the S&P 500 achieved positive returns during the Great Recession of 2008, with Dollar General at the top. While there are other factors at play, Dollar General did well during this period in large part because these stores offer low-cost alternatives to core commodities like food, detergent, and basic apparel.
Low-Cost Products
Few products are as well-known as Campbell’s Soup when it comes to the ability to weather a recession on an individual level. Campbell’s Soup did well during the 2008 recession, as it has done in the previous 28 recessions in its 139-year history. Campbell’s Soup, like Dollar General, benefits from both recession-proof principles: food is a staple, and a can of soup is about as cheap as it gets.
Repair Shops and Consignment Stores
Buying new is generally not an option during a recession. Repairing an existing item or replacing it with a used one is a low-cost option to this. As a result, thrift stores, pawn shops, and repair shops are recession-resistant enterprises that typically do better during downturns. When money is tight, auto repair firms thrive because mending a big-ticket item like a car is far more realistic than buying a new one. Large resale marketplaces like Ebay offer a diverse range of things at low rates, which might satisfy a specific need or provide some relief and pleasure when circumstances are rough.
Needs
It’s simple to see why necessities create recession-proof industries. There are some things and services that are hard, or nearly impossible, to live without, even when times are tough. Businesses that meet a demand remain steady or perform better during recessions.
Food, water, and shelter are typically the first things that come to mind. Medical treatment and pharmaceuticals, hygiene goods such as soap and toothpaste, and basic services such as power and garbage pickup are all examples of necessities. Some businesses, as previously indicated, combine needs with low-cost alternatives, resulting in low-cost items that meet needs.
Medical Services
Medical services were three of the top ten best-performing equities during the 2008 crisis. This includes, for example, hospitals, pharmaceutical companies, and medical equipment makers. The necessity for medical services during a recession is obvious, as recessions increase stress and make maintaining a healthy lifestyle more difficult.
Logistics
Trucking is certainly not the first thing that springs to mind when you think of a need, but it is an important service that takes place behind the scenes. Whether it’s trucks, railcars, ships, or planes, every product that makes its way into stores or between production facilities passes via logistics. Despite the fact that demand for commodities is declining as the economy slows, logistics services remain stable.
Packaged Food and Bottled Water
Food and water are important even in the most desperate of circumstances. Consumers stock up on nonperishable food and clean water during recessions because they are worried about the future. Affordable commodities having a lengthy shelf life, such as Campbell’s Soup, and bottled water, encounter spikes in demand, especially during unpredictably occurring events. In reaction to COVID-19, bottled water sales jumped 52 percent during the initial lockdown period, while ice and water vending sales increased 10 and 30 percent, respectively, over the same period last year.
There are a few other issues to consider during the COVID-19 pandemic-induced recession. Soap and sanitizer sales have surged more than would be expected in prior recessions due to the demand for cleaning and sanitation. In reaction to health difficulties, medical services are anticipated to increase much more than usual. As a result of the closure of many public places such as restaurants and bars, sales in grocery shops and liquor stores have skyrocketed. Despite this, all of these enterprises are based on the concepts that make a sector recession-proof.
Is luxury merchandise recession-proof?
Regardless of the state of their underlying economies, all corporations seek for growth and excellent earnings. Some, however, fail owing to a lack of understanding of actual customer loyalty, product/service positioning, and/or the contagion that can spread from elsewhere. During a recession, three-quarters of businesses see a drop in sales, but just 14% see an increase in revenue and profitability.
Stocks that are recession-proof are classified as such by institutional investors “Defensive”: enterprises that have been shown to be impervious to economic shocks, with the proviso that their performance during good times is not as stellar as others. In the year leading up to September 2019, Goldman Sachs’ defensive stock index returned 11 percent, while the S&P 500 returned only 1.9 percent.
To be recession-proof, however, a firm must either provide something that is a high enough priority that even the most frugal consumer will buy, or conversely, see demand surge owing to the difficult economic conditions.
The graph below shows the growth of a number of industries throughout the 2008/09 crisis, and it’s evident that a number of them performed well due to their recession-proof properties.
Here are some instances of industries that have shown to be recession-proof. Pay special attention to the behavior that surrounds the product/service, rather than the product/service itself “protection.”
Household Staples: Sustenance
The term “staples” is important since it refers to the basic, everyday products that we require for nourishment and personal hygiene. So, instead of caviar, choose bread and soap over false tan.
To maintain their weight, an adult man and woman need 2,500 and 2,000 calories per day, respectively. This does not change during a recession, and businesses that offer the basic necessities of life will remain unaffected. To overcome a TAM ceiling of population * calories, food firms have decreased the nutritional content of their products over time in order to induce more snacking.
When you look at a consumer goods company like Proctor & Gamble or Unilever, you’ll see that their portfolio is full of household staples and brands that cater to a variety of budgets. Such a strategy assures that they are malleable enough to deal with demand spikes, and that their performance during a recession can fluctuate between consumer preferences while still maintaining overall sales levels.
The same approach applies to businesses that provide personal or household hygiene goods, as well as pet supply stores.
Heritage Luxury Brands: Respected Quality
Despite their high cost, luxury items are remarkably resistant to recessions. A recession can actually lead to more consumers choosing to heritage companies with generations of expertise and brand cache, as their tastes become more sophisticated. The intangible promise of quality, distinction, and long-term worth accounts for a significant portion of the price of a luxury item. For example, luxury timepieces are marketed as heirlooms to be passed down down the generations.
Inflation does not always coincide with recessions, but when it does, demand for luxury items soars since the item retains its worth and does not devalue. Inflation is a problem in Argentina, and businesses are spending every dollar on high-quality inventory to build up large runways as an inflation hedge. This is because they are purchasing products that will not depreciate in value.
Vices: Addictive Pleasures
The easiest approach to define what binds this section together in terms of an economic concept is to put addictive activities together. Because addiction is inelastic, alcohol, nicotine, and gambling are pleasures that can withstand economic hardships. Sugar and caffeine could potentially be included in this category. There’s also the more abstract notion that these hobbies might serve as “escapes,” which can provide much-needed relief to stressed customers during difficult times. Alcohol sales increased by 9% during the US recession of 2008.
Addiction is a difficult topic, but many corporations try to instill euphoria in their customers about their products in the hopes of inducing inflexibility. Consumer intelligence and behavior monitoring have been pushed up to highly complex levels by Internet enterprises. As a way to create addictive loyalty, consider items like social media, the infinite scroll, and in-app purchases in games.
Healthcare: Necessity
Businesses that focus on providing healthcare are generally stable enterprises that are unaffected by economic downturns. This is owing to the fact that health is a mortal problem that must be taken care of and will take precedence over all other expenditures.
This industry has numerous sub-sections, one of which is resident care. The aging demographics of the wealthy baby-boomer group approaching retirement suggest that healthcare spending will remain stable in the future.
Budget Travel: Value
For the past 45 years, Southwest Airlines has been profitable. Low-cost airlines had the effect of fundamentally disrupting the notion of air travel, extending its market reach to previously unreachable lower-income groups; the cost of a trip has decreased by 50% in real terms in the 50 years leading up to 2013.
Budget travel, which includes long-distance bus travel, staycations, and public transportation, is a dependable industry. During upturns, it performs well because to its necessity (those relatives can’t come to see you) and value, which breeds loyalty and greater frequency from frugal flyers. Its popularity grows during downturns as a result of its cost advantages.
Budget airlines’ operational management is critical to their success since they operate on razor-thin profit margins and hence need to have effective and streamlined business procedures. Ryanair, for example, has a fleet of 419 planes, all but one of which are Boeing 737-800s. By using only one plane model, it is possible to keep parts, repairs, maintenance personnel, and all other necessary operations as simple as possible.
Utilities: Protection
Infrastructure that transports goods into our lives is not the most glamorous of industries, but it is one that can withstand any storm due to its necessity. During a recession, the needs for gas, water, electricity, and telephone service do not vary. These industries also benefit from their ties to government regulation, which can either give subsidies or hinder outside competition, providing a cloak of recession-proof protection.