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.
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.
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:
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.
Fortunately, the steps for handling a rolling recession aren’t much different from handling any other economic downturn:
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.
Q.ai is the trade name of Quantalytics Holdings, LLC. Q.ai, LLC is a wholly-owned subsidiary of Quantalytics Holdings, LLC ("Quantalytics"). Quantalytics offers automated financial advice tools through Quantalytics Investment Advisors, LLC ("QAI"), an SEC-registered investment advisor. QIA’s investment advisory services are ONLY available only to residents of the United States. Disclosures concerning QIA’s investment advisory services are available on its Form ADV filed with the SEC. The content in this newsletter is for informational purposes only and does not constitute a comprehensive description of Q.ai's investment advisory services.