3 Good Things About Recessions

Hugging friends
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When tough economic times appear — like right now — it’s natural to worry over the negative aspects. And it’s true that an economic downturn causes a lot of hardship for people. Just ask the tens of millions of people who lost their jobs over the past few months.

No one wants to try to manage their money — or their lives — through a recession.

However, it’s not all doom and gloom. There are some things that actually improve during a recession. So, while we don’t wish difficulty on anyone, following are some silver linings that accompany an economic down cycle.

1. Cheap stocks

For those hoping to boost future portfolios, a recession is the time to go bargain hunting. As the stock market drops, you might be tempted to sell and abandon what feels like a sinking ship. However, instead of locking in losses, recessions can be time to look for good deals and buy more stock while shares are cheaper.

Money Talks News founder Stacy Johnson recently wrote about the benefits of buying when the market is on sale.

Markets go up and down, and there is no guarantee that what happened in the past will repeat in the future. However, history has shown that buying when the market is low can pay off down the road.

Of course, you won’t be able to predict exactly when the market bottom will arrive, but you can still get a good deal on stocks if you buy them when they’re at a lower price. Stacy recommends looking at blue-chip stocks with dividends, as well as considering index funds.

2. Lower death rate

Interestingly, the mortality rate can fall during a recession. Between 2005 and 2010, a time period that included the Great Recession, mortality rates actually fell as unemployment in urban areas rose, a recent study found.

One of the biggest contributions to the lower death rate was a decline in the cardiovascular (heart) disease mortality rate. Car accidents were another category that saw a reduced mortality rate.

While there isn’t a direct link between a recession and a lower death rate, one of the study’s authors shared a theory with NPR about why mortality might decrease during times of economic distress.

“When the economy is worse, people have less money to spend. They may go out and have unhealthy meals less often. They may smoke less or drink less. They may drive less. That’s kind of what people have in mind when they’re thinking about why increases in unemployment are linked to decreases in mortality.”

We probably need more information to figure out the causes of a lower death rate during a recession. And mortality rates are unlikely to fall during an economic crisis like this one, which is tied to a pandemic.

However, a decrease in mortality might be one of the positive aspects of many recessions.

3. People re-evaluate what matters

Many people re-evaluate their lives in times of stress and think about their budget priorities.

In the early part of 2009, during the thick of the Great Recession, the savings rate increased to 6.9% — its highest level since 1993, according to a PBS report of the time. That also represented a jump from the near-zero savings rate of early 2008.

By January 2020, the savings rate was at 7.9%, according to the Bureau of Economic Analysis. The steep rise from zero savings rates to nearly 8% a dozen years later shows that as people feel more concerned about economic conditions, they shift their priorities to thrift.

Additionally, they might also think about other life choices during a recession. The New York Times reported that many people rethink what it means to have a good life during tough economic times.

“And yet, despite this bleak reality, some talk persists of silver linings: less cash to spend means less materialism, a real change to “the definition of living well,” as Jim Taylor, a vice president of Harrison Group, a market research firm in Waterbury, Conn., told The Times as the big banks melted down in the fall of 2008.”

It’s not all sunshine and rainbows, but there are those who find that economic stress causes them to look at what really matters — time with family and friends. That is a lesson we all have learned in the midst of the coronavirus pandemic.

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