Where I mix career information and career decision making in a test tube and see what happens

Friday, February 13, 2015

Which Industries Are Recession-Proof?


Everyone knows that the nation is now recovering from the worst recession since the Great Depression. But not every industry sank into recession or recovered from it on the same schedule. In fact, some did not sink at all, and some have not yet recovered. I thought it would be interesting to look at employment in the major industries and see how their experiences varied over the course of the years from 2007 to 2013.

I obtained figures from the Occupational Employment Survey of the Bureau of Labor Statistics and graphed them. (Note that for the second and third graphs below, the y axis starts at a number greater than zero. I used scales that would emphasize vertical shifts. If you find the graphs below rather small to read, just click on the links that pull up larger versions.)

The most important lesson to take away from all three graphs is that the low-tide mark of employment in most industries did not happen right after the financial crisis of 2008, but rather two years later, in 2010. When recession first strikes, employers generally try to hold onto skilled workers and hope for a quick turnaround to better times. They may have a cushion of resources that enables them to postpone layoffs

But when the economic slump drags on and the rainy-day funds are expended, employers start to shed workers. And as unemployed people draw down their own rainy-day funds cut back on their own expenditures, the slackening demand adds to the woes of employers. This is the recessionary spiral that can take a few years to hit bottom. Europe, which chose the path of austerity rather than stimulus, seems stuck in a valley, but the American economy, as a whole, started to turn upward after 2010.

But different industries have followed different paths. Let's start by looking at the first chart below. (Larger image here.)

Of these seven industries, only three follow the classic U-shaped curve of loss and recovery: the purple line, Mining, the pale blue line, Real Estate and Rental and Leasing, and the orange line, Arts, Entertainment, and Recreation. It's not surprising that Real Estate follows this U curve, because a dramatic loss of real estate value is what precipitated the financial crisis. (Note that, like property values in most locales, employment in this industry has not recovered the pre-recession level.) It's also to be expected that the Arts would lose business during recession, although the downward dip of the curve is really quite shallow. These jobs seem to be less sensitive than you might expect. Mining, on the other hand, actually owes its dramatic uptick in recent years not as much to the economic recovery as to the developing technology of fracking.

Management of Companies and Enterprises, the turquoise line, hardly declined at all during the recession and more recently  has been making impressive gains. Everyone knows managers who lost their jobs in that downturn, but apparently jobs in management are less sensitive than those of rank-and-file workers.

The two lines at the bottom--for Utilities (green) and Agriculture, Forestry, Fishing, and Hunting (dark red) are almost level rather than curving. People need electricity, water, and other utilities no matter how the economy is doing, and a cutback in volume (for example, less use of electricity for manufacturing) has little effect on the number of people needed to work at the utility plant. Agriculture sometimes suffers from downturns in prices because of overproduction, but the rapidly rising world population and some diversion of crops to biofuel production seem have kept employment steady in recent years.

The really dismal story here is what happened to the Information industry--which consists mostly of the media, not computer technology. Like Mining, this industry has been affected mostly by technology, but not in a good way. As more and more media content migrates to the Internet and media companies consolidate, the need for workers has reached a permanently lower level than before the recession.

http://www.shatkin.com/siteimages/IndustryEmployment4.jpg

Now, let's look at the second chart. (Larger image here.) All of these medium-sized industries follow the classic U-shaped curve, although there are two interesting variants on the U shape: Construction (pale blue, second from the top) dropped off very steeply after the housing bubble popped and is still a very long way from recovering to its pre-recession level. Professional, Scientific, and Technical Services (orange, at the top), by contrast, has already recouped all the lost jobs and is reaching new heights. This industry includes America's premier field, high tech.


http://www.shatkin.com/siteimages/IndustryEmployment5.jpg

The third chart (larger image here) shows the largest industries. Here, the most dramatic curve is the light red line at the top, Health Care and Social Assistance. As I predicted in my 2008 book 150 Best Recession-Proof Jobs, this industry was unfazed by the recession because it is vital to life and has been gaining in demand because of the aging Baby Boomers. Expect this upward path to continue.

Educational Services (turquoise) is actually an upside-down U, peaking when other industries bottomed out and falling slightly thereafter, although this curve is very shallow. This is another industry that I predicted would be recession-proof, because people seek additional education during an economic downturn--displaced workers retooling for new jobs or young people postponing their entry to the workforce. The slight downturn in more recent years is largely explained by cuts in public education budgets, a consequence of the political movement to lower taxes, and by the increasing use of adjunct teachers in postsecondary education.

The orange curve for Manufacturing resembles the path taken by Construction in the previous chart: a steep decline into recession, followed by a slow and inadequate recovery. In dollar terms, Manufacturing has actually bounced back, but employers in this industry rely more heavily on automation than they did a decade ago, so fewer human workers are needed.

The path for Retail Trade (pale blue) is a much shallower version of this same curve. As consumers have opened their wallets, retail purchases have returned, but automation--especially the large amount of buying that gets done on websites--has reduced the number of workers.


http://www.shatkin.com/siteimages/IndustryEmployment6.jpg

The takeaway from this set of charts is that it is possible to ride out a downturn with minimal risk of job loss, provided you establish a career in a recession-proof industry. But it also shows that technology can cause long-term, perhaps permanent changes in the need for workers in some industries. As technology advances, it may increasingly affect employment in industries that previously have not felt its impact, such as education, health care, and professional services. One of the best ways to find job security is to work with technology in any field at a high level of skill.

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