The Good, The Bad, and The Ugly: How Different Businesses And Jobs Hold Up During A Recession

When the economy turns toward recession, how does it affect different businesses and by default, different jobs? Remember that recessions are basically the opposite of what we’re used to: a shrinking economy. That means flat to negative growth overall, but there are some businesses and jobs that actually thrive during periods of general economic contraction.

Closed FactoryThe list of “recession proof” businesses and jobs is pretty short. Since 70 percent of the U.S. economy relies on consumer spending, and consumers typically cut back when a recession hits, there are few consistently safe shelters from the storm of a serious downturn. But still, there are a few …

The Good

Businesses that offer alternatives to higher priced goods will do well. If you work for a company that sells merchandise or services at prices lower than competitors, you’re going to be in better shape than the “high end” stores. When the economy starts to slow, people start looking around for ways to cut back on expenses, and they give up the frivolous items in favor of the basics. Examples might include:

  • Food. People are going to eat, regardless of what the economy does, but consumers will be looking to get the most food for their money. Dollar menus, buffets, and inexpensive restaurants will do well.
  • Personal care. People will buy shampoo and soap, again, regardless of the economy. They might not buy the $8.99 bottle with organic fruit extracts, but probably the 99 cent “econo-bottle.”
  • Health care. Normally, health care might suffer during a recession, but with an aging population, it is expected to remain strong despite an economic downturn.
  • Job search firms. With people worried about losing their jobs and a significant number of them actually losing theirs, job search firms and search tools like Executive Search Online will prosper in a recession. and Executive Search Online are also expected to have a lot of business.
  • Funeral homes. Death doesn’t really care about the business cycle. Casket makers might see more demand for the cheaper models though.
  • Second hand and discount stores. If you can offer people a way to get a reliable product more cheaply than the mall, you’re going to be in good shape.
  • Online businesses. Amazon posted a 30% gain over last year, which can probably be directly tied to gas prices. When it costs an extra $5 just to get to Barnes and Noble, consumers start seeking alternatives. Ebay will probably do really well as people start to unload their “stuff” to free up some cash.
  • Home repair experts. In the current economy, homes just aren’t selling as well so people will seek ways to improve their current home. Consumers will look for inexpensive flooring options, energy efficient windows, plumbing and electrical upgrades, improvements to their heating and air conditioning systems. They will also be looking for really inexpensive ways to improve their homes.
  • Auction Houses. For those who cannot seem to sell their personal or real property, auction houses will gladly take care of it. Auctioneers are also brought in when a bank or finance company is forced to liquidate the assets of their customers who are unable to pay back a loan.
  • Accountants. In a down economy, accountants are in bigger demand to help keep up with where the money IS going.
  • Consultants. If you have ideas on how a business can save money, make extra money, run more efficiently, or increase revenues, consulting could flourish.
  • Freelancers. Businesses will look for people to just get the job done without going on payroll. Writers, photographers, and editors immediately come to mind, but freelance work can also be performed by reporters, executive headhunters, and ordinary people doing ordinary things like data entry.

The Bad

Remember that in a recession there’s a shortage of capital but an abundance of labor. You don’t want to be in competition with most minimum capital needed types of businesses, nor do you want to be looking for employment in a field where there are many players.

  • Car makers. Especially luxury car makers. Manufacturing a vehicle is a very capital intensive process and purchasing one is a long term decision. Consumers avoid long term decisions in the face of uncertainty.
  • Jewelers. Could jewelry be the ultimate wants vs. needs poster child?
  • Real estate agents. With the crumbling housing market and a tightening credit market, real estate agencies are being squeezed on both ends.
  • Upper end clothing stores. Again, a wants vs. needs issue. The name on the label doesn’t matter nearly as much in a recession.
  • Credit card companies. Though people may resort to using credit cards early in a recession, the long run prospects aren’t too good for companies offering payments to customers who can’t make them.
  • Home builders. They’re in the same boat as the real estate agents. Uncertainty about the future and tight credit will prevent them from getting ahead like they did in the previous decade.
  • Travel and associated industries. Think airlines, aircraft manufacturers, travel agencies, cruise lines, hotels, restaurants, rental car agencies, and resorts. People probably won’t want to spend money on these items when they aren’t sure if they’ll have a job.
  • Casinos. Believe it or not, casinos usually suffer during periods of slowed economic activity. Gambling is seen as an extravagance by all but the most troubled gamblers and the industry generally declines during recessions.
  • Capital goods. Furniture makers, equipment manufacturers, large scale electrical equipment manufacturers, aerospace and defense firms, engineering, and larger construction projects all tend to suffer in a recession.

The Ugly

There are some businesses that will prosper but they have a shady, distasteful side to them. Unfortunately, they also benefit from a downward slide in the economy.

  • Scam artists. When people feel the desperation of a down economy, they’re more susceptible to the crazy scams that always come along. Some of them aren’t illegal either. Multi-level marketing companies will probably flourish as people fall for their antics and gyrations about how “chasing a dream” made someone rich. Here, hand out 20 of these CD’s and you’ll make a fortune …
  • Debt Collectors. If you don’t mind the work, collections is another area that remains steady in good times or bad, but particularly bad. If you like telephone work, you can develop a clientele that will rely on you to collect on overdue bills. These companies operate on the premise that consumers will pay a certain number of bills no matter what … debt collection companies strive to be one of those bills that gets paid.
  • Collateral recovery. These companies have been dubbed throughout economic history as repo companies. These are the people in the movies that show up at 3 AM and “steal back” the car that you don’t make your payments on. In all actuality, most of their business occurs during the day.
  • Tax collectors. How does the old saying go? “In all this world nothing is certain but death and taxes.” For all reported income, there will always be a form of collection to aid government programs.
  • Serving papers. When the economy tanks, companies and jobs serving official papers becomes a hot commodity. Companies are employed to “serve” everything from divorce papers to court papers.
  • Pawn Shops. People who cannot pay their mortgage but own a Rolex, or a Benelli shotgun, or a high end drum set, or a 64″ flat screen TV will be heading to the pawn shops. They wil buy these items for pennies on the dollar and sell them for a killing.
  • Buyers of bad debt. And I’m not talking about the Federal government. Certain companies specialize in purchasing bad paper and they use the same tactics as the pawn shops and debt collectors. If you can buy a receivable that has a face value of $25,000 for only $1,500 and then “settle” the debt for $7,500 (30 cents on the dollar), you just made a 500% return on your money. Companies using these tactics will flourish in a recession.

[tags]economics, finance, taxes, recession, depression, job loss, careers, prosperity, government[/tags]

photo credit: tomsaint11

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