Many stories about the “r word” have hit the national media in recent weeks, causing hesitancy in the marketplace and potentially affecting the pace of economic development decision-making. Katie Culp and Tim Cook discuss who recession would impact the most and other what-ifs on the most recent (i) on Economic Development with Gerry Dick.
Industries Impacted: Certain industries may be impacted by recession more deeply than others. Cook believes industrial will be the first to feel the effects of recession as these projects are more capital-intensive. The tech industry will also feel the heat. Cook states, “Tech isn’t as capital intensive, but it will affect the number of jobs being created. Hiring slows down, sometimes there are layoffs.”
Rural Versus Urban: Lack of economic diversity will likely leave rural areas reeling should recession hit. “When businesses layoff or close, it’s devastating anywhere, but particularly in a rural area. The economy isn’t as diverse and there aren’t as many jobs to absorb layoffs,” states Culp.
Effects on Workforce: For a temporary amount of time, recession is a good thing for employers as they are able to find workers more easily. But this also means some of the alternative workforce development programs that have been beneficial in the past – such as ex-convicts and other disenfranchised populations getting employment opportunities – will trail off.
Long term, recession will affect the mainstream workforce, and employers will start to reevaluate how they handle amenities, wages, benefits, and more.
Incentives Strategy: Government can become more stringent during recession and may question back-end compliance more than usual. For example, states and cities will question whether companies have hired the number of people they committed to hire when they first secured economic incentives.
But Cook says the opposite can also happen. “When there is a recession, [government] can be more hesitant to enforce compliance. … They don’t want to claw back incentives on a business that’s already struggling.”
Culp notes the types of projects receiving incentives also shift during recession as the competition is less fierce. When the economy is good, there are a plethora of projects to consider. When the economy is bad, there aren’t. “State and local governments tend to be more particular about who they’re willing to incentivize when the economy is good. When we hit a downturn, projects they may not have looked at before become a lot more compelling.”
Predictions: Between the national news stories that are already creating some hesitation, the upcoming presidential election, and the fact that the last quarter of the year is traditionally slow from an economic growth standpoint, both Culp and Cook predict the timing for recession could be negatively serendipitous and may happen late this year.
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