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Some industries are at greater risk during times of recession. Find out the six industries economists believe may experience tough times ahead.
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With a potential recession on the horizon, the research group The Conference Board, Inc. has released a study showing which industries are at the greatest risk of layoffs. Here’s what The Conference Board found.
1. Tech companies
According to The Conference Board Job Loss Risk Index, the information services sector currently carries the highest risk of job losses during a recession. During the pandemic, tech companies had to hire as many new employees as they could to fulfill the technological demand of those working or studying from home.
Once pandemic-related restrictions began to lift, tech companies found themselves with too many employees. As high-growth, highly leveraged companies, these tech businesses were more sensitive to interest rate hikes than most industries. As the Federal Reserve began raising the interest rate to fight inflation, the companies almost immediately lost value.
By the end of 2022, more than 93,000 tech jobs had been cut from public and private tech companies. So far this year, another 158,535 workers at U.S.-based tech companies have experienced a job loss and been faced with making their money stretch as they look for a new position.
2. Warehousing and transportation-dependent companies
Again, the pandemic impacted how many new employees were brought on board. In this case, it was for companies catering to all the online shopping that occurred during the lockdowns. Once life approached normal and people began to visit brick-and-mortar stores, the need for warehouse and transportation workers diminished.
3. Construction and repair
One of the more surprising findings of the Job Loss Risk Index is the probability that jobs in construction, repair, and maintenance are expected to be on the line. It’s natural for the housing industry to weaken during a recession due to construction’s sensitivity to interest rate hikes.
Unfortunately, along with less demand for new construction projects, there is expected to be less demand for home repair and maintenance workers to look over existing structures, due to belt-tightening.
4. Manufacturing companies
How susceptible a company is to layoffs depends, in part, on what it manufactures and how likely consumers are to cut that product out of their budgets during a recession. For example, consumers will continue to spend on healthcare, utilities, food, and household items during an economic downturn. There are likely to be fewer layoffs in companies manufacturing those goods. Companies that manufacture non-essentials are at greater risk of cutbacks.
5. Wholesale trade companies
Let’s say a company has built strong relationships within the lumber industry, and buys wood in bulk and at a discount. That company then sells the wood to furniture manufacturers for a tidy profit. Profits are divided between their next wholesale deal, business checking account, and the everyday cost of doing business.
When a recession hits and Americans put furniture purchases on hold, there’s a trickle-down effect. Furniture stores suffer, furniture manufacturers hurt, and wholesalers feel the sting. As the industries they service begin layoffs, wholesalers begin their own layoff process.
6. Real estate, rental, and leasing companies
As mentioned, the housing market is extremely sensitive to interest rate hikes. During a recession, fewer potential buyers and renters are willing to take the leap, leading to job loss in sectors that facilitate purchases and rentals. Depending on how hesitant home buyers are, mortgage lenders may also feel the pinch.
If you’re concerned about your job
Even thinking about a layoff is enough to strike fear into the average worker’s heart. If it’s something you find yourself worrying about, there are concrete steps you can take to prepare. Hopefully, you’ll never need to implement a “layoff plan,” but if you do, you’ll be ready.
Here’s a good way to get started.
Familiarize yourself with unemployment laws in your state.
Losing a job is stressful for most people, and the last thing anyone wants to do following a job loss is figure out how they plan to pay bills. The good news is that unemployment benefits are available to those who have experienced a layoff due to no fault of their own.
Weekly benefits are based on your income, and the maximum amount a person can collect per week also varies by state. For example, maximum weekly benefits range from $235 to $1,015, depending on your state.
Take action: Learn everything you can about unemployment benefits in your state. The idea is to know how much money you’ll be working with.
Create a layoff budget
A layoff budget is essentially your monthly budget on a diet. Go through your budget line by line to determine which expenses can be cut or reduced.
Take action: Rather than wait until you’re in the middle of a stressful situation, decide now what can be slashed from your budget. It may be a gym membership, hobby, dining out, monthly subscriptions, or a multitude of streaming services.
Build an emergency savings account
If you don’t already have an emergency fund in place, use this time to stash away as much money as possible. The goal is to save enough to cover three to six months’ worth of bills. If you can’t possibly afford to put money away each paycheck, look for new ways to fund the account. For example:
If you typically receive an income tax refund each year, that means you’re having too much withheld from your paycheck. Ask someone in your company’s human resource department to walk you through the process of having less deducted so earnings hit your bank account with each paycheck, rather than at tax time.Get serious about discount shopping. Today, there are some great coupon apps that make it easy to plan and save, directly from your smartphone.Look for a side hustle. These side hustle apps are designed for people who want to earn extra income, but also want to enjoy what they’re doing.Shop for cheaper insurance. According to Insurance.com, the average person can cut 19% from their current auto insurance bill by shopping around and switching insurance carriers. You can save even more by switching homeowners insurance and bundling.
While job cuts are more common in some businesses than others, it can happen anywhere. If you take this time to plan for the worst and hope for the best, you’ll be in good shape to ride out a layoff.
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