All signs point to ‘not sure,’ but innovation thriving. Smart ad dollars will find the right home.
Economists and investors were buoyant Friday when the Labor Department announced we lost only a quarter of a million U.S. jobs. Despite the fact that nearly one in 10 (9.7%) able bodied Americans are now officially out of work – the highest jobless rate since 1983 – and millions more have essentially given up trying, Federal Reserve policy makers said they were increasingly confident the downturn had ended and the economy would start growing again in the second half of the year. What’s a quarter million lost jobs when we saw 700,000+ jobs evaporating monthly during the winter?
A “’jobless recovery” may be underway, but experts say we’re still vulnerable to “adverse shocks” and we’re in for a slow, halting rebound. Not exactly the powerful, “makeup-sex” kind of recovery we’ve been accustomed to when rocketing out of previous recessions. Economists say businesses will remain skittish about hiring. Income growth is sluggish. And credit is still tight for millions of households. A further drag on the employment scene is that older workers, who would normally be retiring at their current ages, are fearful of leaving the workforce as the value of pensions, 401ks and uncertainty about social security keeps them feeling anything but secure. Pretty scary, and there’s no little blue pill to fix all that.
A jobless recovery doesn’t conjure warm, fuzzy feelings for marketers, media professionals and other WANT-creators. We’re the folks who depend on businesses and households NOT being able to do more with less. They need to buy, invest, get bigger, better and of course v2.0 and new and improved.
But this trend toward austerity goes against our consumer DNA. It’s not likely to sustain itself as workers burn themselves out or find new jobs; companies lose orders because they can’t fill demand, and U.S. households, just can’t resist bargains. Demand will eventually win out over restraint, and the spending/hiring cycle will ramp up in due time. Just make sure you’re ready for it.
“This has been an unusual recession in term of severity and the circumstances that triggered it,” noted Abby Joseph Cohen, president of the Global Markets Institute at Goldman Sachs in a recent interview in The Investment Professional magazine. “There has been enormous financial disruption along with a deep and painful recession.” Unlike the prior two recessions which were relatively mild and in which the economy responded well to standard pro-growth policy tools like interest rate reduction and targeted fiscal stimulus policy, the Great Correction of 2008-09 was more extreme and standard policy tools couldn’t be applied, said Joseph. It has been marked by a frozen financial system and economic climate. Goldman Sachs economists expect GDP to be slightly positive in the second half of 09, although Joseph warns the U.S. economic recovery will be linked with the global economy more so than ever before.
What could derail the recovery? Joseph points to three things:
1. Ongoing weakness in the domestic U.S. economy
2. Unresolved financial issues involving mortgages, credit cards and commercial real estate
3. Potential policy missteps in the U.S. and abroad
What’s been lost in all this consternation about the economy is the extent to which innovation (and adoption of new technology) has accelerated.
A nation of early adopters
We’re all gadget geeks now, according to a Forrester Research report released last week which surveyed more than 50,000 households in the U.S. and Canada. Researchers found 63 percent of Americans now have broadband connections, and nearly 10 million households added HDTV in the past year, a 27 percent increase.
Despite the recession, online spending remained strong, with older consumers leading the way. On average, older consumers spent on average $560 online in the past quarter, and one in five, spend over $1,000 over that period. In addition, researchers found that 86 percent of families with children had mobile phones and were more likely to use music, video playback and other advanced features.
More people are also migrating away from the home and office to access the Web via their smartphones. About 15 percent of cellphone owners were using the Internet on their phones in 2008, showing that for a growing number of Americans, there is an increasing “expectation that all the same services and resources are available to us, no matter where we are,” said Charles Golvin, Forrester analyst in a statement.
Outlook murky for ad advertising
All signs point to a relatively robust recovery in ad spending beginning next year, said Matthieu Cooper, a UBS analyst in a recently released report from his forum on the global media climate. Not everyone agrees. For starters, magazine ad pages were down 28 percent for the first half of 2009, according to Publishers Information Bureau. Again, that’s nearly 30 percent lower than the first half of 2008 – which wasn’t exactly a banner year for the print media folks.
Most analysts and ad execs agree the worst is over, but there is little consensus on the strength and duration of the recovery. One reason for caution is that advertisers are waiting….waiting …waiting to commit their budgets. As a result, ad execs and media companies say they have little clarity about spending prospects even for the short term. We may even be seeing a shift back to subscriptions, paid content and other forms of non-advertising revenue.
PWC says the gap between advertising and other forms of media company revenue will continue, as ad spending will remain below 2008 levels for at least another half decade. By contrast, spending on media and entertainment by consumers and businesses will rise to $812 billion in 2013, from $707 billion this year.
If you’re smart, you’ll embrace the new climate of working harder for your money. Marketers and media owners who really take the time to understand their partners’ needs will find a home for the smart dollars still circulating out there. Those that don’t may find themselves left out in the cold, waiting for the good times to return. And it may be a mighty long wait.