Industry recessions

- Recessions don't need to hit entire countries or big regions to have an impact. In fact, a recession can sometimes hit very specific industries. Most industries and businesses do well when the economy does well, and these are called procyclical businesses. In fact, some industries, like tourism and leisure, are very procyclical. When the economy is growing, they experience big booms. But when recession hits, these industries suffer big busts. These are more volatile. In contrast to procyclical businesses, though, some industries actually do better during a recession, like musical instruments and junk food. These are called counter-cyclical. Finally, some industries do okay all the time, like staple foods and healthcare. They're called acyclical because the business cycle doesn't affect them. The important thing here isn't the fancy academic terms but the idea that recession affects businesses and industries differently. Industries in bubbles often crater the hardest. I recently gave a speech at a large financial conference, and someone in the audience asked me how I would define a bubble. To me, a bubble in an industry is when the prices for things are too high, they don't make sense, and when things go back to normal prices will fall and some people will lose money, and potentially a lot of it. That's what happened with the early 2000s tech recession and the 2007 housing recession. In 2000 and 2001, it was the technology sector where the .com bubble burst, and people in tech were left reeling. Of course, between 2007 and 2009, and some might say even later, the housing market was in trouble. This is the biggest example in recent years of an industry in a massive recession. The bursting of the housing bubble created a recession in housing and construction. In fact, even a decade after the 2007 to 2009 Great Recession, housing and construction were still nowhere near recovered. You could say that in some ways we're still in recession. You can see that impact here in a graph of US housing starts, the number of new homes that people are starting to build. They fell sharply during the Great Recession, and even a decade later they remained well below pre-recession levels. Of course, these industry recessions contributed to national recessions, but that isn't always the case. Let's also take a look at energy, specifically oil. Between 2014 and 2016, the oil sector fell into a recession when the price of a barrel of oil was cut by more than half. Good news for car owners, bad news for the millions of Americans employed in the oil industry. This sector impacts can also have a regional impact. For example, Texas and Houston unemployment rates fell faster than the national level coming out of the Great Recession because oil prices were solid. But as the outlook for oil and gas became gloomier in 2014, the US oil and gas sector slid into a recession, and the unemployment rate in Houston went up. What kind of an industry are you in? Does it do really well during a good economy or maybe it does its best when the economy is down? Or maybe your industry is in a bubble right now.