Recently, a lot of reporters have been asking me if there are particular industries that are good for small businesses during recessions. I didn’t really know so I took a look at the data.
I examined the performance of different industries during the last two recessions (1990-1991 and 2001-2003) using data from the Census Bureau’s County Business Patterns.
My definition of “doing well” during a recession was pretty strict. All of the following measures had to have increased by 20 percent or more: the number of establishments; the number of employees; the dollar amount of payroll; the number of establishments with 20 or fewer employees; the number of employees at establishments with 20 or fewer employees; and the dollar amount of payroll at establishments of 20 or fewer employees.
(Also, the Census Bureau had to report data for the industry using the same industry codes in both years and not suppress the data for small firms.)
Below is a table that shows the high growth industries for the 2001-2003 recession.
I also looked at whether businesses in the same industries grew during the previous recession (1990-1991). There are many fewer industries that did well during both of the last two recessions, but there are some:
- Functions closely related to banking (SIC code 6090), which corresponds to mortgage and non-mortgage loan brokers (NAICS code 522310); financial transactions processing, reserve, and clearinghouse activity (NAICS code 522320); and commodity contracts dealing (NAICS code 523130).
- Accident and health insurance (SIC code 6321), which corresponds to direct health and medical insurance carriers (NAICS code 524114); direct title insurance (NAICS code 524127); other direct insurance (NAICS code 524128); and reinsurance carriers (NAICS code 524130).
- Offices of health practitioners, not elsewhere classified (SIC code 8049), which corresponds to offices of physical, occupational and speech therapists and audiologists (NAICS code 541614).
- Business consulting, not elsewhere classified (SIC code 8748), which corresponds to process, physical distribution, and logistics consulting services (NAICS code 541614); and educational support services (NAICS code 611710).
I think it is pretty obvious that the current recession is different than previous recessions and we aren’t going to see a lot of growth in mortgage and non-mortgage loan brokers and direct title insurance; and we may not see much growth related to other functions closely related to banking. But we might see growth in other areas. I suspect that the accident and health insurance industries; offices of health practitioners; and business consulting will show growth through the current recession.
To me, there are three interesting takeaways from these data.
- 1. Even in a recession, some industries grow at a gazelle-like pace across a variety of different dimensions.
- 2. Relatively few industries that do well during one recession tend to do well during other recessions.
- 3. Insurance, health care, and consulting tend to be recession-resistant industries for people running small businesses.
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About the Author: Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool’s Gold: The Truth Behind Angel Investing in America; Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By; Finding Fertile Ground: Identifying Extraordinary Opportunities for New Ventures; Technology Strategy for Managers and Entrepreneurs; and From Ice Cream to the Internet: Using Franchising to Drive the Growth and Profits of Your Company.