Ad business cut 36,400 jobs in April

Employment in advertising, public relations and related services tumbled by 36,400 jobs in April as the ad industry plunged into a deep recession. Ad agencies are cutting staff as they ratchet down into a COVID-induced recession, and history suggests it will be a long slog to bring agency employment back to recent heights. U.S. ad agency employment tends to peak earlier than the overall U.S. job market in the waning days of a business cycle’s economic expansion before a recession, according to Ad Age Datacenter’s analysis of jobs stats for the past 30 years. Agencies make deep job cuts during downturns. And agency jobs typically are late to recover as the economy rebounds. The depth of damage to agency staffing in the current downturn is to be determined. But the outlook is dim. Ad agency staffing in recent years plateaued even as ad spending—propelled by digital—reached new heights. Agencies, which face growing challenges from major consultancies such as Accenture Interactive and competition from in-house agencies, enter this downturn in a weakened state; 2019 was the weakest year for agency growth since the Great Recession. ‹ › × Ad agency and overall U.S. employment and ad spending since 1990 Agency staffing plateaued in recent years even as ad spending grew. (Click image to enlarge) Source: Bureau of Labor Statistics (jobs). Publicis Groupe’s Zenith (ad spending for full year). The overall U.S. unemployment rate surged from 4.4 percent in March to 14.7 percent in April, the highest rate since 1939. The nation last month lost a record 20.5 million jobs—more than one out of eight jobs—as the economy shut down amid the coronavirus pandemic, according to Bureau of Labor Statistics figures released May 8. Ad agency staffing held at 207,100 in March, unchanged from February. U.S. ad agency employment reached an all-time high of 208,800 in August 2018, a year-and-a-half before this recession began. (It may be months before the recession is formally called by the National Bureau of Economic Research, but it appears a contraction began in February or March 2020.) We won’t know official ad agency April staffing for another month. But that number is likely to be bad—as foretold by an unending stream of recent layoff stories on AdAge.com. The BLS tally of “advertising, public relations and related services” employment offers ominous clues. That bucket includes ad agencies, PR agencies and related services such as media buying, media reps, outdoor advertising, direct mail and other services related to advertising. Employment in advertising, public relations and related services tumbled 7.5 percent in April to 451,100 jobs, a stunning loss of 36,400 jobs. Overall U.S. employment generally peaks at or near the start of recessions. Ad agency staffing, in contrast, typically peaks before recessions, making agencies something of a leading indicator. Labor is the biggest cost for agencies—salaries and related expenses last year were 64.6 percent of net revenue at Interpublic Group of Cos.—and agencies are quick to cut staffing when they lose business or when clients reduce spending. (Not coincidentally, cutting ad spending is an easy—if not always defensible—move for marketers when sales weaken and profits slump in a downturn.) On the flip side, agencies are cautious about adding employees as the economy recovers, resulting in a lag in staffing growth post-recession. The early peak/hard fall/late recovery pattern is evident in recessions, according to Ad Age’s analysis of BLS recession-period jobs figures back to 1990. In the 1990-1991 recession, agency employment peaked five months before the start of the recession and didn’t hit bottom until 38 months after the economic recovery began. Agency employment fell 11.1 percent from that peak to bottom, vs. only a 1.5 percent drop for overall U.S. employment from top to bottom. In the 2001 downturn, agency staffing peaked (in the irrational ad exuberance of the dot-com bubble) seven months before the recession began and bottomed out 26 months after the recession ended. Agency employment plunged 20.8 percent from peak to bottom, vs. a 2.0 percent decline for U.S. employment. In the Great Recession (2007-2009), agency employment peaked two months before the downturn began and reached its nadir seven months after the recession ended. In this case, agency jobs began to recover slightly ahead of the overall job market; overall U.S. employment bottomed out eight months after the recession. Agency employment skidded 15.3 percent from peak to bottom, vs. a 6.3 percent drop for U.S. employment. It took 18 years—until 2018—for ad agency employment to climb back and then surpass the record set in dot-com era 2000. It could be years before ad agency employment passes the all-time high reached in 2018. Downtime Employment at ad agencies and in overall economy for recessions since 1990. Beginning of recession July 1990 March 2001 December 2007 February 2020 or March 2020 (presumed) End March 1991 November 2001 June 2009 TBD Length Eight months Eight months 18 months Longest recession since Great Depression TBD U.S. ad agency employment Beginning of recession 172,500 203,900 187,800 207,100February 2020 End 163,500 184,000 169,800 Job change (9,000) (19,900) (18,000) Percent change -5.2% -9.8% -9.6% High point near beginning of recession 172,600 February 1990. Five months before recession began 207,400 August 2000. Seven months before recession began 189,700 October 2007. Two months before recession began 208,800 August 2018 (all-time high). 18 months before recession began (assuming recession started February 2020) Low point in period after end of recession 153,500May 1994.38 months after recession ended 164,200January 2004.26 months after recession ended 160,600January 2010. Seven months after recession ended Job change (19,100) (43,200) (29,100) Percent change -11.1% -20.8% -15.3% Overall U.S. employment (millions) Beginning of recession 109.8 132.7 138.4 152.4February 2020 (all-time high) End 108.6 131.1 131.0 Job change (1.3) (1.6) (7.4) Percent change -1.1% -1.2% -5.3% High point near beginning of recession 109.9June 1990. One month before recession began 132.8February 2001. One month before recession began 138.4January 2008. One month after recession began 152.4February 2020 (all-time high) Low point in period after end of recession 108.2May 1991. Two months after recession ended 130.1August 2003.21 months after recession ended 129.7February 2010. Eight months after recession ended Job change (1.6) (2.6) (8.7) Percent change -1.5% -2.0% -6.3% Overall U.S. unemployment rate Beginning of recession 5.5% 4.3% 5.0% 3.5%February 2020. Last time it was lower was 1969. Close to 1929’s 3.2 percent rate as nation entered first recession (1929-1933) in the Great Depression End 6.8% 5.5% 9.5% Month before start of recession 5.2%June 1990 4.2%February 2001 4.7%November 2007 3.6%January 2020 Peak during or in period after recession 7.8%June 1992.15 months after recession ended 6.3%June 2003.19 months after recession ended 10.0%October 2009. Four months after recession ended. Highest since 1982 (10.8 percent) 14.7%April 2020. Highest since 1939 (17.2 percent). Unemployment in Great Depression peaked at 24.9 percent in 1933 U.S. ad spending Spending (billions) $821991 $1472001 $1502009 Percent change -1.9%1991 vs. 1990 -6.0%2001 vs. 2000 -12.4%2009 vs. 2008 Source: Bureau of Labor Statistics and Ad Age Datacenter research (jobs). Publicis Groupe’s Zenith (ad spending). Ad Age Agency Report 2020

Ad business cut 36,400 jobs in April

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