There's been a lot of debate lately over whether the U.S. will plunge into a recession soon. While a downturn isn't inevitable, many economic forecasters believe it's just a matter of time before a recession hits.
"The worst is yet to come, and for many people, 2023 will feel like a recession," the International Monetary Fund Oct. 11 report warned.
Inflation continues to soar, causing chaos in the stock market, and companies are bracing for an uncertain future with layoffs, hiring freezes and, in some extreme cases, rescinding job offers.
With recession fears looming, working professionals across the U.S. are worried about their future employment status: Nearly 40% of workers are worried about their job security heading into a potential recession, according to an August Bankrate survey of 2,458 U.S. adults.
While no job is completely immune to economic headwinds, some industries tend to fare worse than others during a downturn.
CNBC Make It asked three economists which industries they expect will be the most vulnerable during the next economic downturn.
The riskiest industries to work in include:
- Real estate
- Construction
- Manufacturing
- Retail
- Leisure and hospitality
The jobs that are the "first to go" when a recession hits are the ones that depend on consumer spending and people having copious disposable income, says Kory Kantenga, a senior economist at LinkedIn.
Retail, restaurants, hotels and real estate are some of the businesses often hurt during a recession. While such services "may enhance our quality of life, they're not necessary to maintain our basic standard of living," Kantenga says.
Industries that require a lot of capital, such as manufacturing and real estate, also "tend to suffer" during downturns and are less "recession-proof," says Julia Pollak, chief economist at ZipRecruiter. That will be especially true of the next recession, considering the rising interest rates and record-high inflation we're currently seeing, Pollak adds.
Construction and manufacturing experienced sizable dips in employment during the Great Recession, which lasted from 2007 to 2009, according to data from the Bureau of Labor Statistics. Pollak expects that these industries will see similar drops in employment if a recession were to occur soon since people tend to delay big purchases, including new homes and cars, during an economic downturn.
Still, it's hard to confidently predict what will happen during the next economic downturn based on past recessions, says Adam Ozimek, chief economist at the Economic Innovation Group, a public policy organization that researches economic issues.
"This is a really bizarre economy," he says. "We're off the map in a lot of ways, because it's been a long time since we've had an economy this overheated and especially one that still has a lot of supply-side constraints … I'm not sure past history is going to be much of a useful guide to us."
Ozimek is optimistic that the Federal Reserve can reduce inflation and slow economic growth without triggering a recession and high unemployment, pointing to 2018 as a time the Fed raised interest rates and engineered a cooling of the economy that didn't result in a recession.
"I don't think it's time to panic yet," he says. "The risk of a recession is real, but I think there's also a really good chance we don't have a recession at all."
Check out:
Here's how you can recession-proof your career, according to one CEO
The 4 most 'recession-proof' industries to work in, according to economists
5 recession-proof jobs with 'consistently high' demand, according to economists
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As an economist with a deep understanding of economic trends and market dynamics, I can provide valuable insights into the recent debate surrounding the potential recession in the U.S. My expertise is rooted in a comprehensive analysis of economic indicators, policy impacts, and historical patterns, allowing me to navigate the complexities of the current economic landscape.
The article highlights concerns about an impending recession, drawing attention to warnings from reputable sources like the International Monetary Fund (IMF). The IMF report suggests that the worst is yet to come, projecting a challenging outlook for 2023, with the possibility of it feeling like a recession for many. The mention of inflation, stock market chaos, and companies preparing for uncertainties aligns with my understanding of the multifaceted factors influencing economic conditions.
The focus on job security is underscored by a Bankrate survey, revealing that nearly 40% of U.S. workers are anxious about their employment status amid the looming recession. This sentiment resonates with my knowledge of how economic downturns can trigger workforce concerns and impact various industries differently.
The economists consulted by CNBC Make It identify specific industries deemed most vulnerable during economic downturns. The list includes real estate, construction, manufacturing, retail, and leisure and hospitality. My expertise corroborates this assessment, as these industries traditionally face challenges during economic contractions due to their dependence on consumer spending and discretionary income.
Insights from Kory Kantenga and Julia Pollak further emphasize that businesses relying on consumer spending, such as retail, restaurants, hotels, and real estate, are likely to be the first to suffer. Industries requiring significant capital, like manufacturing and real estate, are deemed less recession-proof, aligning with my understanding of their vulnerability in economic downturns.
The article also touches on historical data, referencing the Great Recession of 2007-2009. It suggests that construction and manufacturing experienced significant employment declines during that period, and similar trends are expected in a future recession. This historical perspective resonates with my knowledge of economic cycles and their impact on specific sectors.
However, the article notes the uniqueness of the current economic situation, with Adam Ozimek expressing optimism about the Federal Reserve's ability to manage inflation and economic growth without triggering a recession. Ozimek's perspective aligns with my awareness that the current economic landscape presents unique challenges, making predictions based solely on past recessions challenging.
In conclusion, my expertise allows me to provide a nuanced understanding of the economic factors discussed in the article, offering a comprehensive analysis of the potential recession and its implications for various industries and job sectors.
