As economic uncertainty looms and concerns about a possible recession intensify, The Conference Board, Inc. has conducted a comprehensive study to pinpoint the industries most susceptible to job losses.
The research group’s findings shed light on the sectors that might face the greatest challenges in weathering the storm. Here’s a breakdown of their analysis.
1. Tech Companies: Struggling Amid Interest Rate Hikes
The information services sector, primarily composed of tech companies, emerges as the industry with the highest risk of job losses during an economic downturn. The Conference Board’s Job Loss Risk Index underscores the vulnerability stemming from an oversupply of employees after a hiring surge during the pandemic.
Tech giants had hastily recruited to meet the escalating demand for technology as remote work and online learning became the norm. However, the subsequent lifting of pandemic restrictions left these companies grappling with an excess workforce.
The sector’s sensitivity to interest rate hikes further exacerbated the situation, with more than 93,000 tech jobs eliminated by the end of 2022. Another 158,535 U.S.-based tech workers have already lost their jobs in the current year.
2. Warehousing and Transportation-Dependent Companies: A Post-Pandemic Slump
Industries heavily reliant on warehousing and transportation also find themselves in a precarious position.
The surge in online shopping during lockdowns prompted a demand for warehouse and transportation workers. However, as consumers began to return to physical stores, the need for these roles diminished, raising concerns about potential layoffs.
3. Construction and Repair: Vulnerable to Economic Volatility
Surprisingly, even industries considered essential like construction and repair face risk due to economic volatility.
The housing industry, intrinsically linked to construction, is vulnerable due to its sensitivity to interest rate hikes. With less demand for new construction projects and homeowners tightening their belts, job losses are expected in both new construction and maintenance roles.
4. Manufacturing Companies: Product Demand Dictates Layoff Susceptibility
The likelihood of layoffs in the manufacturing sector hinges on product demand and consumer spending behavior.
Essential goods such as healthcare, utilities, food, and household items generally maintain stable demand even during economic downturns. However, companies producing non-essential goods face a higher risk of cutbacks.
5. Wholesale Trade Companies: The Ripple Effect of Industry Downturns
Industries intertwined with others, such as wholesale trade companies, experience a ripple effect. For instance, when a company operates within the lumber industry and supplies wood to furniture manufacturers, a downturn in furniture purchases triggers consequences down the line. As furniture stores and manufacturers face challenges, wholesalers too begin to implement layoffs.
6. Real Estate, Rental, and Leasing Companies: Housing Market Sensitivity
The housing market’s sensitivity to interest rate fluctuations places real estate, rental, and leasing companies at risk.
During a recession, potential buyers and renters exhibit hesitancy, leading to job losses within sectors facilitating property transactions. Mortgage lenders might also feel the impact as fewer individuals commit to purchasing homes.
Navigating the Looming Uncertainty: Steps to Prepare
The prospect of job loss can be daunting, prompting the need for proactive preparation. The report provides several actionable steps to mitigate the potential impact:
- Understand Unemployment Laws: Familiarize yourself with unemployment benefits applicable in your state to ease financial stress following a job loss.
- Create a Layoff Budget: Review your monthly budget and identify expenses that can be reduced or eliminated to navigate through leaner times.
- Build an Emergency Savings Account: Aim to accumulate three to six months’ worth of expenses in an emergency fund to cushion the financial blow of job loss.
- Adjust Income Tax Withholding: Optimize your income by adjusting your tax withholding to have more money available in each paycheck.
- Embrace Cost-Saving Measures: Explore coupon apps and seek cheaper insurance options to save money on routine expenditures.
- Explore Side Hustles: Consider engaging in side hustles to supplement your income and diversify your revenue streams.
While the risk of layoffs is particularly pronounced in certain industries, the study emphasizes that preparedness and resourcefulness can help individuals weather potential economic storms. By proactively adopting these measures, individuals can position themselves for greater financial resilience.
