During a recession, consumers trade down in the quality of the goods and services they buy — and because lower-quality products are generally less labor-intensive, this trading down reduces the demand for labor and increases unemployment, argues a study by Nir Jaimovich at the University of Southern California and Sergio Rebelo and Arlene Wong at Northwestern University. Their calculations suggest that 22 to 36% (depending on the measure of quality used and the data set) of the decline in employment during the 2007–2012 period is accounted for by consumers trading down in the quality of the goods and services they bought.
Source: Trading Down and the Business Cycle
