Why Marketers Shouldn't Worry About Wall Street's Late-Week Panic Attack

Here Are the Economic Signals That Should Keep You Up at Night

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What recession? Media-company employment in June scored the biggest one-month job growth in at least 20 years, driven by a surge in internet media. At the same time, U.S. ad agencies added the most jobs in any month since 2006.

Procter & Gamble Co., the nation's and world's largest advertiser, this week reported that its worldwide ad spending jumped 8% to a record $9.3 billion in the year ended June 30. The company expects worldwide sales this fiscal year to increase 5% to 9% and vows to boost ad spending in line with sales growth -- a bullish sign for media considering that P&G is the top U.S. spender on cable TV and in magazines and the No. 2 advertiser on network TV.

On the jobs front, the Aug. 5 report from the Bureau of Labor Statistics beat expectations as the nation added 117,000 jobs in July, while the unemployment rate eased to 9.1% from 9.2%.

There are positive signs in ad-industry jobs: U.S. media employment in June rose by 8,500 jobs, the highest monthly growth since at least 1991, with internet media firms adding 5,000 jobs (an eye-popping 4.8% growth in a single month), according to Ad Age DataCenter's analysis of BLS data. Advertising agencies added 2,800 jobs in June.

To be sure, the ad industry employs 184,500 fewer people today than at the start of the recession in 2007; it's a long road back. (See expanded data at AdAge.com/adjobs.)

Good news: We are not in a recession. GDP has grown for eight consecutive quarters since the Great Recession gave way to a not-so-great recovery in June 2009. Private-sector employment has risen for 17 consecutive months. Corporate earnings have been coming in above expectations.

Bad news: We could be near the tipping point (or dipping point) for the first double-dip recession since 1982. IHS Global Insight, an economic forecasting firm, sees a 40% risk of recession. Stock traders, fearing the worst, sent the Dow crashing 513 points Aug. 4, the sharpest daily decline since December 2008.

Talk of a double-dip recession is worrisome --and plausible. U.S. economic growth is anemic -- GDP rose just 1.3% last quarter -- and there are troubling signs in the economies of Europe and Asia.

Recession talk could turn into recession reality. The economy -- gross domestic product -- consists of consumer spending (71% of GDP last quarter) plus private investment (12.7%) plus government spending (20.2%) plus net exports (-3.9%). Every part of that equation is in flux.

Consumer confidence in July plunged to its lowest level since the recession period of early 2009, according to the Thomson Reuters/University of Michigan Surveys of Consumers. Businesses, worried that consumers won't be in a spending mood, are depositing profits in the bank rather than investing in expansion. Weakness in other economies puts pressure on exports.

Federal, state and local governments are looking to cut spending; government employment has fallen for nine consecutive months, creating more unemployed consumers. Washington's new resolve to slash the federal debt makes it less likely that Congress will extend existing payroll tax cuts and unemployment benefits or agree on other stimulus programs. (Government policies played into earlier double dips. For example, many economists believe that reduced federal spending and a tightened monetary policy helped push the nation into a 1937-38 downturn, the second of two recessions in the Great Depression.)

Any official ruling that we have entered a recession wouldn't come until the damage was done; the private National Bureau of Economic Research typically takes five to 12 months to pronounce officially that a recession had begun months earlier. If we enter a recession between now and next spring, the formal announcement conceivably could come out shortly before the November 2012 election.

What's all this mean? The economy, employment and ad spending today are all growing, but all three are fragile. In the months ahead, financial markets likely will be volatile, consumer confidence will remain under pressure and marketers will need a strong stomach. Get used to talk of a double-dip recession, for it's not going away.

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Contributing: Jack Neff

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