One of the most common questions I am asked currently is: are we in a recession? Technically-speaking... not yet. While shortages are driving up costs and inflation is further complicating consumer spending, the economy is not yet in a recession. As far as the events industry is concerned, it seems we are still in a period of growth.
Weddings are still experiencing the boom–not only from the post-pandemic demand but also because of the generational shift. Gen Y is now between the ages of 25–42, all at the age that is considered to be peak-marrying-age. Corporate events, after being shut down for two years in most parts of the US, have come back feverishly and with budgets to follow.
But what should we look at to gauge market contraction aka a recession? After all, economies cycle. What goes up, must come down. I’m sharing three economic indicators to watch over the next year. These will help determine how confident people are in spending and how that may inform decisions about their event budgets. Lastly, I’ll share what you should be doing to prepare for anything.
Look at: National & regional unemployment rates
It goes without saying that people who are employed will have income to spend and feel more secure in those spending decisions. The national unemployment rate is hovering at 3.5–4% in late 2022. Ideally, we want this to be closer to 5% indicating that employers aren’t short staffed and people can move freely between jobs. A lot of the labor pinch that we’re feeling in our industry is reflected in low unemployment rates. We just can’t find enough people looking for jobs and hospitality seems to be one of the hardest hit industries.
It’s also important to know what’s happening in your local region. Unemployment rates at 2% in San Francisco versus 8% in Detroit impacts what happens in those cities. The low employment rate in San Francisco means that hospitality employers will continue having a hard time staffing events but will have clients who feel secure in their spending. Conversely, Detroit event companies may easily find willing workers, but their clients may not feel comfortable stretching their event budgets in light of local employment instability.
Watch: Local housing market
The Federal Reserve has raised interest rates in an attempt to slow inflation. With higher interest rates, people are less apt to take on a huge loan or mortgage. Naturally, we should see home buying rates go down along with other big purchases. Look to your local housing market to gauge confidence in spending. If people are buying homes, they’re usually making other large investments.
If you begin to see your local real estate market slow down, this can be an indicator that consumers are feeling less financially confident. This almost always mirrors wedding and social event budgets particularly for middle- and lower-income Americans. The upper-income segment, served by luxury wedding providers, tends to have less volatility in their spending though they may make different choices with how they spend their budgets.
Corporate events, conferences, and festivals may be less impacted by the housing market trends. It will largely depend on the industry of the company. Industries tied to consumer buying like retail, automobiles, and technology products will be more conservative with corporate event budgets. But many industries like healthcare, B2B technology, and education aren’t impacted as deeply by consumer spending.
Study: Holiday spending & consumer confidence
Take a look back to see what holiday buying trends were for the tail-end of last year. Was holiday spending steady; or did retail stores see sharp declines? This will define how confident both consumers and corporations feel about spending on events in the current year.
The Consumer Confidence Index is a simple measure of how confident people feel about the economy now and how confident they feel about the future economy. Measured by The Conference Board, it’s a strong indicator for how positive or pessimistic people feel. Because events are planned long in advance this can be a helpful indicator that can shape how confident we feel about people investing in events. If the Consumer Confidence Index begins to trail downward after several quarters, this can signal that people will be more hesitant to make large purchases, including investments into events.
How to prepare for the next recession
So, what do we do when we see that these economic indicators paint a less than rosy picture? First, don’t panic. Market contraction is a normal cycle of the economy. But it’s helpful to be prepared. It’s not unusual to see company sales decline during a recession.
If you were to lose 10–20% of your income in the upcoming year, do you have sufficient cash savings to cover that decline? In other words: looking at your previous year of income, do you have 10–20% of that income in savings? If not, it’s not too late to start squirreling away cash.
The 10–20% of income saved allows you to cover a possible 10–20% loss for a year without having to make drastic budget cuts. Naturally, you will cut back on some of your expenses during a recession, but you won’t be forced to do so in a panicked state. This savings gives you the luxury of time.
In general, it’s great to plan for the future. But don’t live in a state of fear that might hold you back. Plan for the worst and expect the best!