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.
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.