Whenever the economy tips into recession, the relative vulnerability of specific jobs or businesses to downturns suddenly becomes important. Rising unemployment numbers, like those released April 4 showing the U.S. unemployment rate had jumped from 4.8 percent to 5.1 percent, make people worry, ‘Will I get laid off?’ Business owners experience fears of declining sales.
Obviously, some people are more exposed to the harsh winds of a recession than others. The difference often lies in what economists call “income elasticity of demand.” That measures how much people’s willingness to buy a given good or service varies with their income — or with their expectations of what their income may soon be.
If you work producing basic groceries, don’t fret. People keep eating, even when they lose their jobs, just as they keep on heating and lighting their houses. But the less any good or service is a necessity, the greater the likely downturn of profits and employment in companies that produce it.
A friend works as a landscape designer, creating and selling landscape improvements to homeowners. He swears it is the most recession-vulnerable occupation possible. There is nothing easier to put off than a new retaining wall and some arbor vitae in the back yard.
A former student raises gladioluses with his brothers. He can rank the exposure of specific flower species to economic downturns. Funerals and weddings are the bread-and-butter of the floral industry. People continue to buy flowers on these occasions, but they do choose less costly arrangements when money is tight. Cheaper bouquets use some different flowers than expensive ones. So not all cut-flower growers suffer equally.
Moreover, overall floral sales drop in recessions. When the whole household frets about layoffs, a nice card may be a welcome substitute for flowers on Mothers Day or an anniversary.
Many people still go out to eat as unemployment rises, but they tend to go to less expensive restaurants and order less expensive items. Skipping the chicken wings or other appetizers is an easy way to save, as is buying a domestic beer instead of a premium import that costs $2 more. Downtown food vendors can suffer dropping sales as more people brown-bag their lunches.
People still get haircuts, but may not buy expensive shampoos and conditioners sold by stylists, opting instead for low-cost brands at big-box retailers.
Auto dealers can see new car sales swirl down the toilet. But mechanics often get increased business as more people decide to fix the old buggy up one more time rather than trading it in on shiny new wheels.
Not all luxury goods go in the tank. The poshest restaurants and most exclusive clothiers may never skip a beat because the very rich often feel few effects during recessions that are punishing for the middle class.
Some cases are uncertain. A friend bakes for a specialty bread chain. People can easily turn to generic whole-wheat in a supermarket instead of Crusty French Peasant bread for $4.50. But the chain is also a place to buy coffee that’s cheap compared to brand-name specialty coffee franchises. Time will tell how he and millions of other Americans fare in coming months.
© 2008 Edward Lotterman
Chanarambie Consulting, Inc.