Belatedly, the arbiter of business cycles, the private National Bureau of Economic Research, last week ruled the recession that began in March 2001 officially ended in November 2001.
For the advertising market, this pronouncement means ... absolutely nothing.
"It's a non-event. Revisionist history," said Lauren Rich Fine, Merrill Lynch's managing director and resident advertising expert.
For business and consumers, headlines about the end of a recession are better than the alternative. But the news is unlikely to lead to any real boost in weak consumer confidence given another statistic far closer to home: June's 6.4% unemployment rate was the highest since 1994.
Likewise, advertisers probably won't react. Companies' ad budgets are driven by revenue, profits and internal sentiment about the outlook rather than pronouncements about where the economy was, noted Ms. Fine. So the market outlook is unchanged: Slow economic growth and low inflation put pressure on revenue and profits, and advertisers hold the line on spending and push agencies to cut costs.
There's no doubt the economy -- and ad market -- have been growing. There's also no doubt unemployment has been growing both in the overall economy and ad sectors. The economy has gotten more efficient -- at the cost of jobs.
The economy, measured by gross domestic product, is bigger today than it was in the pre-recession peak of 2000. U.S. ad spending fell 6.5% in 2001 -- the biggest decline since 1938 -- but turned up starting in May 2002. Ad spending last year was 2.27% of GDP, on track with the average of 2.26% from 1990-2000, according to an Ad Age analysis. Robert J. Coen, senior vice president and director of forecasting at Interpublic Group of Cos.' Universal McCann, said spending rose 2.4% last year and will rise 4.6% in 2003 -- enough to break the spending record of bubble year 2000.
Doing more with less
It's a case of doing more with less. At least there are signs of jobs stabilizing; agency and broadcasting employment is flat year-to-date, while publishing jobs are down slightly, according to the Bureau of Labor Statistics.
The question is: When will jobs come back? The last recession ended in March 1991 and ad spending turned up in 1992, but advertising employment didn't surpass pre-recession levels until November 1994. Given the weak overall job market, it's hard to envision a real upturn in advertising jobs in this recovery. More problematic, a recovery without jobs has the potential to slip back into recession.