USA TODAY International Edition
Not all industries struggle in recession
Some may thrive despite downturn, keep hiring
The mild recession that economists are predicting this year will likely mean job losses for most U. S. industries, from manufacturing to professional services.
But some sectors will be slammed harder than others, experts say. A few will eke out small gains in a tough environment. And a couple of them are poised to thrive despite any downturn.
Industries that rely on low borrowing costs and demand for consumer goods will likely be hurt most now that the Federal Reserve has raised interest rates sharply and Americans are shifting their spending from goods to services.
“We expect a slowdown pretty much across every industry,” says economist Dante DeAntonio of Moody’s Analytics. But he added, “You’ve got pockets of weakness. … All the interest- rate- sensitive industries will likely struggle more.”
Jobs will probably be lost in manufacturing, construction – particularly housing – and retail.
What industries will grow?
Health care, education and government should post solid gains.
Other service sectors, such as leisure and hospitality, could see roughly stable employment with minimal gains or losses. The industry faces countervailing forces as the health crisis continues to ease even as a downturn crimps household spending.
“This is not going to be a stereotypical recession,” says economist Mike Montgomery of S& P Global Market Intelligence. “There are so many crosscurrents.”
Will the US economy lose jobs?
Overall, S& P Global predicts the U. S. will lose a net 1.3 million jobs this year following a record 6.7 million job gains in 2021 and 4.5 million last year, the second most ever.
By comparison, the nation lost 8.7 million jobs in the Great Recession of 2007- 09 and 22 million in the CO
VID- 19- induced slide of 2020.
Some economists believe the U. S. will dodge a recession as slowing inflation leads the Federal Reserve to halt its rate hikes sooner than expected this year.
Moody’s predicts the nation will avoid recession as it adds a modest 855,000 jobs in 2023.
Employers added a booming 517,000 jobs in January as hiring unexpectedly surged despite high inflation, rising interest rates and the prospect of a weakening economy.
Here’s how job growth could perform in various industries this year, according to S& P Global’s forecast, starting with those hit hardest percentage- wise.
Construction
Employment forecast: Decline of 330,000, or 4.3% of jobs
Construction is set to absorb heavy payroll losses as high interest rates dampen home building. Housing starts fell for the fourth straight month in December. Commercial construction is also weak as many Americans work from home, leaving office vacancy rates high and squashing demand for new office buildings.
Housing boomed early in the pandemic as people moved to bigger houses in the suburbs and took advantage of historically low interest rates. Construction payrolls reached a record 7.8 million in December, according to the Labor Department and research firm SMBC Nikko.
But, “Construction employment can remain elevated just up to the point of recession,” says SMBC Chief U. S. Economist Joe LaVorgna.
Professional and business services
Employment forecast: Decline of 959,000, or 4.3% of jobs
Most of the losses – 857,000 – will be among staffing agencies as hiring slows and employers cut lots of temporary workers, Montgomery says. They’re typically the first let go in a downturn since they don’t get severance payments and their layoffs inflict less damage on staff morale.
Temporary help services have shed jobs for five straight months.
Other types of professional services – including lawyers, accountants, engineers and architects – could see modest job losses as the U. S. enters a recession, Montgomery says.
Manufacturing
Employment forecast: Decline of 412,000, or 3.2% of jobs
Manufacturing is already in recession territory with activity declining for the third straight month in January, according to the Institute for Supply Management. Consumers who splurged on furniture, appliances and used cars while they were stuck at home early in the pandemic have shifted their purchases to services.
Also, manufacturers have excessive inventories after bulking up to cope with supply chain troubles that are now easing, Montgomery says.
And weak growth in foreign countries – combined with a strong dollar that makes U. S. goods more expensive overseas – have reduced the production of items for export.
But not all sectors will get hammered. Makers of wood products, furniture and metals will be battered by the pullback in housing and commercial construction, Montgomery says. And the production of factory machines should fall as interest rates make the purchases less affordable, says Tom Runiewicz, an industrial economist at S& P Global.
But auto manufacturing was decimated early in the crisis as chip supply problems doused production and sales, and it should rebound now that the snarls are being resolved, Montgomery says.
At its 75- employee plant in Lincoln, Nebraska, Yasufuku USA, which makes parts for cars, jet skis and farming vehicles, is ramping up hiring on its auto team, says Senior Manager Carsen Kuehl. But the factory is adding fewer workers in jet ski part- making as consumers rein in discretionary purchases, says Senior Manager Carsen Kuehl.
Information
Employment forecast: Decline of 67,000, or 2.2% of jobs Consumers are likely to scale back phone and cable services as recession worries and layoffs mount, Montgomery says. Meanwhile, Internet giants like Facebook owner Meta, Twitter and Google already have announced more than 200,000 layoffs since last year and job cuts are projected to spread.
Financial activities
Employment forecast: Decline of 141,000, or 1.6% of jobs Goldman Sachs, among other Wall Street firms, has announced thousands of job cuts as higher interest rates dampen borrowing and the stock market’s sell- off last year discourages mergers.
Leisure and hospitality
Employment forecast: Decline of 37,000, or 0.2% of jobs
The industry – which includes restaurants, hotels, sports arenas and theaters – could endure small payroll losses as it grapples with the effects of a slump, with many Americans dining out and traveling less often.
But after struggling to add workers since 2020, restaurants are more likely to slow hiring than lay people off, Montgomery and DeAntonio say.
At the same time, many people are still resuming going to movies, sporting events, nightclubs and other entertainment venues as the pandemic becomes less imposing, Runiewicz says. Leisure and hospitality employment are 932,000 below its pre- pandemic level.
In other words, it could be a close call. Moody’s predicts the industry will gain about 370,000 jobs.
Retail
Employment forecast: Decline of 202,000, or 1.3% of jobs.
The diverse industry is broadly set to be pinched as consumers downshift their spending in a recession and buy more services than goods. Retail also has lost workers because of a longterm shift to online shopping.
But while most retail categories – including general merchandise, apparel, furniture and groceries – will likely be affected, auto dealers are expected to benefit from the smoother-flowing supply chain, Montgomery says.
Transportation and warehousing
Employment forecast: Decline of 37,000, or 0.5% of jobs
Truck fleets and warehouse companies will likely feel the effects of the weakness in manufacturing.
Government
Employment forecast: Gain of 243,000 workers, or 1.1% of jobs
State and local governments benefited from COVID- 19- related stimulus funding and healthy tax revenue during the pandemic’s housing boom, Runiewicz says. They’re still 452,000 jobs below their pre- COVID- 19 level and trying to catch up.
Education and health care
Employment forecast: Gain of 536,000, or 2.2% of jobs
Americans are still undergoing elective surgeries and other treatments they put off during the pandemic. Baby boomers are aging, increasing demand for health services. And hospitals are still struggling to hire nurses and other workers after many quit during the pandemic, Montgomery and DeAntonio say.
Meanwhile, schools are still trying to add workers after reopening in- person learning following COVID- 19- related lockdowns.
Mining and logging
Employment forecast: Gain of 36,000, or 5.6%, of jobs
Oil exploration and production should record strong gains as energy demand remains sturdy while global supplies are limited by Russia’s war in Ukraine. Although gasoline demand could soften in a recession, the industry is still catching up from sharp declines in investment and employment early in the pandemic, Montgomery and DeAntonio say.