What Is a Rolling Recession?

A rolling recession, also called a rolling adjustment recession, “rolls” through an economy in patches. Generally, just one or a handful of regions or sectors are impacted at a time before the recession moves on. 

Understanding rolling recessions

A recession occurs when activities like business investing and consumer spending slow down. Layoffs and reduced pay may follow, leading to increased unemployment, lower household incomes and reduced consumer spending. The cycle continues until investor and consumer confidence return and kickstart the economy.  

Rolling recessions often experience the same set of symptoms. However, they’re also unique in that they don’t hit economies equally, or even all at once. 

In fact, the broader economy may continue to grow, with metrics like GDP and employment remaining solid. 

But while the national economy performs, local regions or industries may suffer. The economic and logistical impacts of recession can hit business profits, spike unemployment and drive down household incomes. 

And when that area or industry finally recovers, the recession may “roll” to the next region or market sector. 

Depending on the circumstances, certain industries or areas may never buckle under. In others, every part of an economy may be hit – eventually. 

Causes of a rolling recession

The causes of rolling recessions tend to be complex, intertwined and at least partly situation-specific. Factors that may contribute to rolling recessions may include:

• Rising interest rates
• Higher unemployment rates
• Decreased demand for consumer goods and services
• Rising inflation

Rolling recession example

Some economists have mused that the economic circumstances of 2022 to early 2023 constituted a rolling recession. 

The situation began during the tech craze of 2021, when everyone and their grand-cat went all-in on WFH tech. But when consumer demand decreased in 2022, the bottom fell out of the tech industry (and its stock) in 2022. In November, tech firms began laying off workers in droves, spiking industry-specific unemployment. 

The housing market also buckled slightly after a year of frenzied purchases and sky-high prices. Rising interest rates and tighter credit conditions contributed to a shakier housing market.  

But despite mass layoffs in one sector and uneasiness in at least two more, the jobs market stayed strong. The January 2023 jobs report added 517,000 jobs against 185,000 expected, mostly in leisure and hospitality.

In other words, while the tech sector experienced some recession-like impacts, service-based industries boomed amid a strong labor market backdrop. 

How to cope with a rolling recession

Fortunately, the steps for handling a rolling recession aren’t much different from handling any other economic downturn:

• Stick to a budget to reduce expenses and maximize income
• Pay off your debts to free up cash flow
• Stash at least 3-6 months’ worth of living expenses in a high-yield savings account
• Continue investing for retirement – even if it’s just $25 a week
• Don’t pull out of the market if stocks take a dip – you’ll only lose money you’ve already invested
• Consider using dollar-cost averaging strategies to lower your investment costs over time

Oh, and don’t forget taking advantage of artificial intelligence to secure your future – and your peace of mind. If you’re not sure where to start, Q.ai’s Investment Kits make hedging against recession as easy as unlocking your phone.