As we head into the recession, it is important to know which industries are most affected in the real economy (not a capital markets view).
We borrowed the Beta concept from finance. It is a measure of how much volatility there is relative to the total market. We call it Reta so it is not confused with capital markets Beta.
Reta = volatility in the industry relative to the volatility in the private sector.
The graph shows how Reta differs for select industries. See how sensitive oil & gas and automotive are, while food & beverage is counter-cyclical.
Also note the large differences between goods and services. This explains why the manufacturing belt between the coasts suffer more in recessions.
Covid is not taken into account.
Value added (VA) = Revenue less purchases = Labor plus capital inputs = GDP contribution
Reta = Covariance(industry value added growth, private sector value added growth) / Variance(industry value added growth)
Reta >1 Industry more volatile than private sector. 0< Reta <1 Industry less volatile but synchronized. Reta =0 Industry does not move with private sector. Reta <0 Industry is counter-cyclical.
Source: BEA’s quarterly industry value added accounts 2005–2019