Recession? Not for These Businesses

Roger Payne, an auto mechanic near San Antonio, took the recession in stride and decided to move his business closer to home. As in, to his backyard. Payne, who quit his old repair job eight months ago to strike out on his own, runs Painless Automotive from his silver tin garage.

"I'm just slammed here. I've got three engine swaps, an axle to do, an airbag system, and a fuel box," Payne said on Jan. 16. Even without a Web site, Painless draws cash-conscious customers from the northern parts of San Antonio, who don't mind the tow to his shop on Route 181, just outside the city's southeastern limit. "Before the recession, [business] was all right," Payne says, but now his backyard is parked 12 deep with cars. The mechanic has no full-time employees, enlisted friends to build a sign, and his wife handles marketing. With Payne's competitive rates, even used-car dealers bring him work.

While the U.S. recession is largely a story of bank failures, job losses, and consumer penny-pinching, the downturn is also stimulating sections of the economy that run counter to such economic cycles. People look to repair, not replace. Workers switch industries, seeking recession havens where possible such as health care and education. According to the Bureau of Labor Statistics, health-care employment rose by 372,000 workers in 2008 while the unemployment rate hit 7.2%, or 11.1 million people. Discount chains such as Dollar Tree (DLTR) and Family Dollar Stores (FDO) now attract customers from up-market retailers. The same goes for travel: North American hostel bookings rose by 25% last year, says Aisling White, a spokeswoman for Web Reservations International, a Dublin-based online reservation firm.

New heels on Wall Street
For those who service the oldest mode of transport, walking, clients have become plentiful, eschewing new footwear for fixes to the old. Troy Horner, who with his father owns Peabody Shoe Repair in Nashville, has the same problem as Payne: He's completely booked. Winter is always high season for worn soles as Americans stash sandals for closed-toe shoes and boots. But at Dawson's in Columbia, Mo., Bob Wood has noticed more customers seeking new heels as well, and a fine shine. He says he can tell the recession is boosting business by the nature and amount of what turns up. Last Monday, he says, a woman brought in "a sack full of shoes" for restoration.

Shoe repairs are also in high demand at the heart of America's economic problems—on Wall Street. Across from the headquarters of troubled insurer American International Group (AIG) in lower Manhattan, Minas Polychronakis runs Minas Shoe Repair. The 2008 winter season provided him with a 20% increase in business over 2007, despite a sizeable exodus of the district's workforce. "If there were more people here, I'm sure the percentage would be higher," Polychronakis says wistfully.

Another booming area is law. "Our work is brisk," says Gus A. Paloian, a partner in the bankruptcy, workouts, and business reorganization division at Seyfarth Shaw in Chicago. "We don't like to brag about it but the [filing] rate is astronomical." Three years ago, Seyfarth started hiring attorneys from other firms, and fresh out of law school, in order to cope with an influx of real estate cases. Since then, the expanding file of clients includes lending agencies, retail companies, biofuel producers, manufacturers, auto-parts suppliers, and the casino industry. "We're seeing problems in virtually all segments of the economy," says Paloian, who doesn't foresee a dry spell for some time.

Action from shakeouts
Corporate downsizing often means lengthy and complicated litigation, as businesses seek bankruptcy protection to restructure. At the New York offices of Proskauer Rose, the 150-attorney labor and employment department is busy working on class actions, collective bargaining, and litigation. Real estate and construction proceedings lead the way with media and entertainment companies following close behind. "We represent a number of construction companies telling horror stories," says Paul Salvatore, co-chair of Proskauer Rose's global labor and employment law department. "Financial service firms were great tenants."

Salvatore says the ripple effect of America's recession drives business to his firm in larger volume than past downturns. "We didn't have the fundamental shakeout of firms that were household names. Goldman Sachs (GS) is now a bank."

America's education businesses are absorbing some of the unemployed and unsatisfied domestic workers. DeVry University, a subsidiary of DeVry (DV), is benefiting from citizens looking to reposition themselves in the job market. Online enrollment increased by a full quarter—from 41,128 to 51,628—in November 2008 compared with a year earlier. Graduate-student enrollment rose 13.7% during the same period, from 15,657 to 17,803. DeVry shares also trade just below a 52-week high of 61. Much of the focus has been on the health sector as students look for jobs as medical assistants, surgical technicians, and respiratory therapists. DeVry also benefits from companies that reimburse employees for tuition, such as Verizon (VZ), Best Buy (BBY), Boeing (BA), and McDonald's (MCD). "It's a good, calculated risk," DeVry University President David Pauldine says of returning to school. "It's either that or you drop out and head to Mexico," he jokes.

At the Citrus Heights (Calif.) campus of Western Career College, a DeVry subsidiary, sisters Julie Johnson, Hollie Pearson, and Aimie Earle are pursuing certifications to work as dental assistants. Like many other DeVry students, the three are changing careers. Recently married, Johnson worked the graveyard shift as a cocktail waitress in the card room of a Sacramento casino. Earle was laid off in September after two years at a car dealership. Pearson, who worked in central California real estate, says she probably wouldn't have returned to school if business had stayed strong. "Since the market went where it went, this is a good change for me. I'm glad to be here," Pearson says about school. By August, the sisters expect to be certified dental assistants, with jobs soon after. DeVry says that more than 90% of its graduates find jobs in their field within six months.

Let's not go out
When times turn rough, people tend to stay home more. That means plenty of home movie nights, less eating out, and more video games. With interactive games like Rock Band, Guitar Hero, and just about anything on the Nintendo Wii platform, the industry currently reflects few of America's financial problems. Total revenue jumped 40% in 2007, and another 20% through the first 11 months of last year. (December figures are not yet available.) The Entertainment Software Association expects to tally sales of $22 billion for 2008, when all the counting is finished, says president and CEO Mike Gallagher.

For many people, video games are not only a great value proposition—$65 for how many hours?—they attract a wide age range. Rock Band II is issuing new releases based on music by The Who and the Beatles, which will likely bring some older folks into the gaming fold. Right now, there's still growth potential for the industry. Consumers purchased 2 million Wii consoles in November and 300 million computer games last year. "What you have now is a pretty significant installed base in American households. That enlarges the addressable market for software companies," says Gallagher. Analysts are optimistic that the industry will beat its 2008 records, too.

At his garage in San Antonio, Payne also is likely see his business continue to grow. "With people losing lots of their money in the market and jobs being lost, they're looking me up," he says.

Courtesy - Business Week