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Recent headlines bark of more optimistic predictions from ad-spending forecasters, but the changes announced amount to a shift from seeing the glass half-empty to believing it to be half-full.

Taylor Nelson Sofres' CMR late last month said ad spending this year will rise 2.5% over last year, a full point more than its initial forecast of a 1.5% increase made last January. Similarly, Zenith Optimedia Group updated its forecast to a drop of 1.2%, a bit better than an April prediction of a 1.8% decline.

unlikely to shift

Describing marketers' near-term advertising plans, Martin Sorrell, WPP Group's group chief executive, cited a "lethargy" among corporate bosses in terms of ramping up advertising. "That's unlikely to shift dramatically in 2002," he said at AdWatch: Outlook 2002. He added: "CEOs, for good reasons and bad reasons, ... are very focused on costs and not very focused on topline [revenue]."

Review consultant Richard Roth of Roth Associates, New York, agrees. On the new-business front, he said, "the next six months are going to be business as usual-and that's not very good."

Agencies are keeping a tight lid on spending. That means more firing than hiring. WPP, for example, cut 10% of its worldwide staff in the first five months of the year. More reports of agency layoffs are trickling in. Interpublic Group of Cos.' Bozell, New York, let go of about 15% of its staff (about 65 employees) after losing Datek; on the West Coast, Interpublic's Foote, Cone & Belding Worldwide, Irvine, cut 12 employees to "get costs in line with revenue," according to an agency executive. And Havas' Arnold Worldwide in June closed its San Francisco office, cutting 17 people.

U.S. ad agency employment in April stood at 182,900 people, the lowest level since March 1999, according to the Bureau of Labor Statistics. Agencies have cut nearly 20,000 jobs since employment peaked at 202,800 in August 2000.

Omnicom Group's Goodby, Silverstein & Partners, San Francisco, has added 75 staffers this year after new-business wins. But agency hiring remains slow. "I really think people would like to hire," said Sharon Spielman, managing director, Jerry Fields Associates, a Manhattan-based recruitment firm. But at those agencies owned by holding companies, "financial pressure is preventing them from doing so. Holding companies must meet the sales and earnings expectations," she said.

contributing factor

Industry consolidation will likely contribute to expense reductions. Executives at the soon-to-be merged Publicis Groupe and Bcom3 Group expect that at a minimum, employees in redundant functions will be let go, with many senior-level jobs at Bcom3's Chicago headquarters likely to be eliminated.

Prospects aren't entirely glum. There are small indications of new advertising appearing in two areas that fell far, technology and dot-coms. And, of course, some accounts will go into review, meaning an agency office can win if someone else loses. "There's a scramble for dollars around the world," said one West Coast agency executive. "We have to go and take. You have to beat [other offices of] your own agency to the punch. It's every man for himself."

contributing: alice z. cuneo

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