Starting a small business is a risky proposition even in the best of times. If you’re thinking about starting one but are worried about how it will fare during a downturn, you might want to consider an industry that can be described as “recession-proof.”
These industries, also called defensive industries, tend to be stable in recessions, but aren’t necessarily boomers in up markets. If a business provides goods or services fitting this profile, its odds of weathering economic storms are better than those that don’t. This is why medical and diagnostic laboratories saw 8.22 percent gains in 2009, a brutal year in the recession in which many businesses had a hard time staying in the black.
Today, the economic news is pretty similar to that of a decade ago, thanks to the COVID-19 pandemic that threw a wrench in economic activity across the economy. However, the recession we’re facing today is much different than the Great Recession of 2008, namely because it practically came out of nowhere, and shelter-in-place policies altered traditional commerce.
With that said, you can never tell for sure which industries are truly recession-proof. However, there are some that tend to fare well, and even thrive, during the worst of times. This is because they typically offer products or services that people can’t go without, no matter the state of affairs the country faces.
Whether you’re looking to start your own recession-proof business or invest in industries that do well in a recession, one piece of financial advice is to understand what makes an industry recession-proof. While we don’t know for certain the consequences the current economic downturn will have on the economy, we can learn from industries that came out on top after the 2008 recession. Keep reading to view the top recession-proof industries (listed alphabetically) below, or use the provided links to jump to an industry of your choice.
- What Is a Recession?
- Recession-Proof Industries Common Factors
- What Industries Are Recession-Proof?
- Getting Through a Recession
What Is a Recession?
A recession is defined as a period of significant decline in general economic activity. Typically, it’s characterized by multiple months of economic decline spread across the economy and seen through employment numbers, gross domestic product (GDP), income levels, industrial production, and wholesale retail sales.
So, are we in a recession now? According to the National Bureau of Economic Research, yes, we are in a recession. Many economists and experts defer to NBER to officially confirm whether the country is experiencing a recession, and in a recent statement, the announcement was made. The massive decline in employment and production, paired with its broad span over the entire economy, warrants the economic downturn we’re experiencing today as a recession.
For many Americans, finding a way to make ends meet during a recession is a top priority. When work dries up, our unemployment advice is to search for recession-proof industries that are stable and reliable. Take a look at factors to look for that makes an industry recession-proof in the section below.
Recession-Proof Industries Common Factors
As you decide whether to look for work, open up a business, or invest in a recession-proof industry, it’s important to look at common factors that can make certain industries resistant to times of economic hardship. Doing so can help you manage during times of economic downturn. Some examples of recession-proof industries include:
- Industries that provide essential goods, such as grocery stores, supermarkets, and wholesale stores
- Industries that offer maintenance and repair services, such as auto shops and HVAC businesses
- Industries associated with essential public works, such as the electricity, water, sewage, and garbage industries
- Industries that provide mandated services, such as those offering pipeline inspections or home inspections
Knowing the types of industries that can thrive during a recession can help you prepare for a recession, should one come in the future. With a plan, you can continue to work, do business, or invest wisely to stay afloat when times get tough.
What Industries Are Recession-Proof?
As we’ve said, you can never predict what industries are least affected by a recession. That’s because there are different factors that have a role in how a recession will play out. One of the factors of the Great Depression was excessive credit card spending done by consumers. In 2008, it was bankers betting on risky mortgage securities they were issuing, and today, it’s the COVID-19 pandemic.
However, industries that provide goods that satisfy basic human needs historically make it out of recessions unscathed and may even experience rapid growth. Those industries can be great industries to look for work, start a business, or invest in. Take a look at our top recession-proof industries below:
Accounting, Tax Preparation, Bookkeeping, and Payroll Services
Just like death and disease, taxes don’t go away just because the economy is bad. In fact, a bad economy is all the more reason for taxpayers to consult an accountant, particularly one who’s skilled in getting refunds for clients.
Taxes are unavoidable, even during a recession. This is why clients often seek out accounts to ensure they file their tax returns correctly and even gather financial advice to learn how to manage their finances during troubling times.
Beer, Wine, and Distilled Alcoholic Beverages Merchant Wholesalers
A Friday night of bar-hopping can easily cost $50 to $100, depending on where it takes place. This type of expenditure may have become harder to justify during a recession, but that doesn’t mean that anyone actually will cut their drinking habits. In fact, in a study conducted by researchers at the University of Buffalo Research Institute on Addictions, it was found that people tend to drink more alcoholic beverages during times of recession compared to times of economic prosperity.
For the millions of American parents who are now unemployed due to the coronavirus pandemic, one ray of sunshine is that they now have the opportunity to spend more time with their children at home. However, not everyone is out of work, especially essential workers like nurses, doctors, government employees, grocery store workers, farmers, transportation employees, and so forth.
This means that their children still need a place to go while they’re clocking-in to their place of employment. Even though the number of children who need to attend daycare might not be at an all-time high, child care workers are often needed, and those who have been able to retain their job keep this industry afloat.
Consumer Packaged Goods (CPG)
Consumer packaged goods are any consumer staples often found in consumer’s grocery carts at the store. Even when funds are tight, consumers still need to buy items they use on a daily basis. CPG companies often do well during recessions because shoppers typically stick to the brands they’ve grown to trust. So, whether you sell food, cleaning products, or beauty products, you can have peace of mind knowing a recession most likely won’t put you under.
While the current state of affairs we’re in today doesn’t resemble what every recession looks like, CPG companies that are offering online retail services are performing exceptionally well, mostly due to stay-at-home orders. Household good stores and supermarkets experienced the strongest increase in online sales from June 2019, going from 108.1% of total retail sales to 128.8% in June 2020.
One of the most famous quotes attributed to Benjamin Franklin is: “Nothing can be said to be certain, except death and taxes.” Any business based on such a certainty is virtually guaranteed to make it through a recession. Even though the idea may be grim, the demand for death-care services are always there. This remains true even as consumers opt to have less expensive funerals due to the strict social distancing measures and strained finances brought on by the current recession.
Few people express enthusiasm for visits to the dentist. Nonetheless, dentists’ offices often perform well during recessions for the simple reason that gum surgeries, fillings, and root canals simply won’t wait for the market to improve. Even when money is tight, consumers can only handle a cavity or toothache for so long.
Physicians’ offices are similar to dentists’ offices and other health-related industries in that they provide an essential service that won’t wait for the economy to improve. This is especially true with the coronavirus pandemic infecting over 8.7 million people as of October 2020 in the U.S., which is resulting in physicians scrambling to find hospital beds and provide other essential health services.
A common theme you might be noticing is that a recession doesn’t stop certain things from happening (or breaking, in this case). While the economy may be faltering, it doesn’t mean your car won’t randomly break down, or your fridge will stop running. With that said, repair services can often be a reliable recession-proof franchise.
Even though consumers may be more conscious about their spending habits, there are just some essentials they need to keep in working order so they can go about their daily lives. From roof repair to HVAC and laptop repair to car repair, most repair industries are recession-proof. This is also true because, during a recession, consumers are often more likely to fix something they already have at a lower cost than go out and buy something brand-new.
When money is tight, consumers aren’t going to buy brand-new, out-of-the-box furniture, clothing, accessories, and books. Instead, they’ll turn to consignment shops and thrift stores to see what they can find that meets their needs, all while saving a few extra dollars.
Today, thrifting has become a popular pastime, especially for Gen Z and Gen Y consumers who are not only making less money than their older counterparts but are also looking for alternatives to fast fashion. Even during recessions, consumers like to treat themselves to clothes, toys, and other goods, making retail consignment a recession-proof industry.
This industry includes computer and technology-related companies that design, build, or implement software and hardware. Even during the Great Recession of 2008, It experienced double-digit gains between 2006 and 2011, with the exception of 2009, a bad year across the board for most. Still, its comparatively poor 2009 gain was much better than many other industries could manage.
Today, technology is even more prevalent due to more systems and devices relying on innovative computer systems and hardware. Programmers, information security analysts, and computer support specialists are often needed to support business activity, especially with millions of Americans transitioning to remote work.
Technology has infiltrated almost all aspects of life. Consumers ask Alexa to turn the lights on, secure their homes with the most advanced security systems, and seek out the latest gadgets dropped by Apple, Samsung, and other competitors, making the technology industry one that can weather almost any storm. And with the COVID-19 pandemic sweeping across the globe, the biotech industry has seen a massive uptick in demand.
Getting Through a Recession
Recessions are hard on almost everybody, namely because they span across the entire economy, which makes getting through a recession tough. Knowing the industries that do well in a recession can help you build a plan to find stable employment or reliable investments that won’t leave you out of work or money.
While this list is not exhaustive, these industries that thrive in a recession can serve as a starting block to help you prepare for times of economic downturn. From accounting and alcohol to retail consignment and technology, these are just some of the industries least affected by recessions you should keep an eye on.