The U.S. economy is currently in the midst of its most challenging period since the early 1990s. The economy lost 760,000 jobs during the first nine months of 2008, and national gross domestic product likely contracted during the second half of the year. Add in the turmoil in the global financial markets, and it is likely that an economic recovery will not gain a firm footing until well into 2009.

Recessions are nothing new for the country, and indeed the national economy experienced a downturn as recently as the beginning of this decade. But the difference between the current economy and the last recession is that many consumers in the early 2000s were able to tap into the equity of their homes to bridge the gap during the downturn. As a result, consumer spending continued to grow, even though the overall economy contracted. With falling home prices and the difficulty obtaining credit, that is simply not an option for many consumers today.

The current perfect storm of declining wealth, elevated food and energy prices and stagnant wages have all combined to put consumers in a precarious position. Consumer spending plunged 3.1% in the third quarter on an inflation-adjusted annualized basis-its first decline since 1991 and its largest drop since 1980.

During periods such as this, the economy is typically propped up by Main Street sectors-businesses that are the cornerstones of their local communities. Businesses that provide products and services like the local restaurant, market or salon are essential to the day-to-day lives of Americans.

The Professional Beauty Association's new "National Profile of the Salon Industry" illustrates how the American salon industry is an engine of growth for Main Street, even during times of economic uncertainty. This article takes a look at four components of the National Profile, and puts them in the context of the current economic environment.

Beefing up Main Street

The U.S. salon industry registered steady growth in recent years. Although much of the growth in salon establishments was driven by substantial increases in the number of non-employer establishments, there were also steady gains in the number of employment-based salon locations. Between 2001 and 2006, the number of employment-based salon establishments in the U.S. increased 10%, according to the Bureau of Labor Statistics. During the same five-year period, the number of employment-based businesses in all industries also grew 10%, which illustrates the consistent contribution to the economy of employment-based salons.

As the number of employment-based salons continues to grow, so too do the number of employment opportunities for salon professionals. In recent years, employment-based salons consistently provided growing numbers of job opportunities even when many other industries were in decline. The U.S. employment-based salon industry is currently on pace in 2008 to register its 16th consecutive year of job growth. More impressively, job growth in the salon industry outpaced the overall economy in eight of the last nine years, including 2008. Even while the overall economy was losing jobs in both 2002 and 2003, salon industry employment continued to grow.

The contribution of the salon industry to the overall economy has been even more impressive during the current economic downturn. In the 12 months ending September 2008, the number of jobs at employment-based salons increased 1.5%. During the same 12-month period, the total number of jobs in the overall economy declined 0.2%.

Although the salon industry isn't recession proof, it posted steady sales growth in recent years amidst all of the economic volatility. In 2006, the most recent year for which sales figures are available, the overall salon industry registered total sales of $37.5 billion - up 86% from a sales volume of $20.2 billion in 1997. Although non-employers represent a majority of salon industry establishments, employment-based salons account for 55% of total salon industry sales.

The Value of Value

In today's economy, consumers are continually searching for value in the product and services they buy. Sharp increases in price can have a dramatic impact on consumer behavior, as was illustrated by the unprecedented run-up in gas prices earlier this year.

In recent years, salons have consistently provided their customers with value, even with their prices increasing at rates similar to the overall inflation rate. According to the Bureau of Labor Statistics, the Consumer Price Index for Haircuts and Other Personal Care Services increased at rates below 4% in each of the last nine years. More recently, salon prices increased at rates below the overall inflation rate. In fact, 2007 marked the first year since 2003 in which prices for haircuts and other personal care services outpaced the overall inflation rate.

More recently, salons have provided outstanding value to their cash-strapped customers in today's economy. In the 12 months ending September 2008, prices for haircuts and other personal care services rose a relatively modest 3.2%, well below the overall inflation rate of 4.9% and significantly less than the 7.6% increase in grocery store prices and the 23.1% jump in energy prices.

An Industry of Diversity

A diverse workforce is one of the hallmarks of the salon industry, providing employment and career opportunities for individuals of all backgrounds. According to data from the Bureau of Labor Statistics, the salon industry employs a higher proportion of African-Americans, Asians and women than the overall U.S. workforce.

Twelve percent of individuals in personal appearance occupations are African American, slightly above the national average of 11%. Fourteen percent of salon professionals are Asian, compared to 5% of the overall U.S. workforce.

Eighty-five percent of individuals in personal appearance occupations are women, nearly twice as much as the 46% of the overall U.S. workforce that is represented by women.

Further Information

Want more of the industry research revealed in this article? Visit probeauty.org/resources and log in with your section password to download the complete 2008 edition of the "National Profile of the Salon Industry." The profile is complimentary for all PBA members and $149 for non-members. Make sure to check out the many other research resources available to members on the PBA website while you're there!

Part of being a trade association is gathering and reporting critical data and information that cannot be obtained anywhere else. PBA's mission as the trade association for all sections of the professional beauty industry is to provide our members with relevant, timely and important information that will allow them to better manage, benchmark and grow their businesses.

Did you know that PBA has an economist to collect vital data on the industry? An independent economist based in Washington, DC, Bruce Grindy, is also the official economist for the Professional Beauty Association. As PBA's economist, Bruce is responsible for compiling the data for many of PBA's research efforts including the "National Profile of the U.S. Salon Industry," the "Distributor Benchmarking Survey," the "Portrait of the Salon/Spa Industry by Congressional District" and other valuable member resources. Turn to page 10 to learn more about the 2008 "Distributor Benchmarking Survey."