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10 Industries That Will Be Hurt Most by the Sequester

Rick Newman

President Barack Obama says the sequester will kill "hundreds of thousands of jobs." But where?

To find out, I analyzed data provided by industry-research firm IBIS World to identify sectors of the economy most dependent on government spending. IBIS World counts 94 industries, employing 36 million people and accounting for about $6 trillion in revenue, that are vulnerable to government cutbacks. That doesn't mean those industries will start shedding jobs immediately. Some analysts think the sequester may only be in effect for a couple of weeks in March before Congress replaces the abrupt spending cuts with a more rational plan.

[PHOTOS: Jobless Keep Searching for Work]

If the sequester stays in effect, however, it will cut spending by about $44 billion during the rest of 2013, according to the Congressional Budget Office, with cuts spread evenly across most federal agencies. (A few programs, including Social Security and Medicare, are largely exempt). Annual cuts will eventually rise to about $110 billion, with the austerity measures meant to trim about $1 trillion in total spending during the next decade. If that happens, these industries will be most heavily affected:

Defense. The sequester legislation stipulates that half the spending cuts must come from defense, which will hurt contractors that build airplanes, tanks, ships, electronics and many other types of battlefield gear. That will hit big contractors such as Boeing and Lockheed Martin along with hundreds of smaller subcontractors.

Public schools. Just a few years ago, federal stimulus measures boosted funding for schools. Now, sequester cuts could lead to layoffs of teachers, administrators and support staff, plus lost funding for transportation, school maintenance and extracurricular programs. Most education funding is local, but a considerable portion trickles down from the federal government.

Road, bridge and tunnel construction. About three quarters of the money spent to build and maintain the nation's transportation infrastructure comes from the government, so many projects will be scaled back or delayed, and some canceled outright.

[READ: Where Government Spending Cuts Will Hurt Most]

Remediation and environmental cleanup. Washington provides one-third of the funding for this industry, which involves the cleanup of mining sites, old industrial facilities, unsafe buildings other environmental hazards.

Guns and ammunition. Despite the standoff over new gun control proposals, gun makers need the government as a customer--for sales to both the military and to law enforcement agencies. If there's a silver lining, it's that new gun control efforts have boosted sales to civilians, which could help offset reductions in government orders.

Colleges and universities. Most revenue comes from tuition and fees, but the government funds university research and provides loans and grants that help students pay for school, including community colleges that focus on technical training. Less money for students could force schools to offer more aid or lower tuition.

Steel framing. Companies in this industry build heavy steel products used to construct buildings, bridges, water treatment facilities and many other types of infrastructure. This industry will suffer as infrastructure funding gets cut.

[READ: Infrastructure Upgrades Needed to Fuel Domestic Energy Boom]

Public transportation. Bus, subway and rail networks are typically financed in part by government funds. If gas prices stay high and the migration from rural to urban areas continues, an increase in ridership might make up for less government money.

Airports. Funding cutbacks that reduce employment could worsen air-traffic delays and security lines, while slowing development projects and leaving airports more crowded.

Social services facilities. Healthcare facilities funded by Medicare or Medicaid are largely exempt from the sequester cuts, but homeless shelters, job training centers, adoption agencies, food banks and other community centers that rely on aid from Washington aren't. Federal cutbacks could be a double whammy, since many such facilities have already endured state or local funding reductions.

Rick Newman's latest book is Rebounders: How Winners Pivot From Setback to Success. Follow him on Twitter: @rickjnewman.

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