Agency jobs slip 9% from peak

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In just 14 months, the advertising downturn has cost U.S. agencies 17,800 jobs and taken employment to its lowest level since May 1999.

Ominously, the rate of agency firings ratcheted up this summer and fall: More than half the agency job cuts occurred from August through October, the most recent data available. That period includes the September terrorist attacks.

"September the 11th was icing on the cake," said Nick Bishop, former VP-consumer connections at Coca-Cola Co. and an Interpublic Group of Cos. veteran.

Some observers suggest the situation might be improving, though they expect a surplus of resumes until at least 2003. Even if the avalanche of pink slips is over-assuming no other cataclysmic events, and assuming conventional wisdom that the economy begins to percolate sometime next year-it will take at least three to six months for agency hiring to cautiously pick up, according to agency executives, recruiters and other observers.

Agency employment peaked at 202,300 seven months before the recession began in March 2001, according to the Bureau of Labor Statistics. Since the peak, 9% of agency jobs have disappeared. That about matches the 8.4% drop in ad spending in the first nine months of this year (see TurnSignals, P. 24).

Leading forecasters predict either a small increase or dip in ad spending in 2002; that would suggest no dramatic swings next year in agency employment.

Mr. Bishop and other executives said layoffs struck more quickly this time than they did around the 1990-91 recession, when it took 25 months to cut 17,800 agency jobs. Industry watchers say agencies were faster to fire this time because more are owned by public companies under pressure to deliver results even when the economy is sinking.

In the last downturn, dismissals started in September 1989-almost a full year before the recession-and dribbled on through May 1994. Agency employment didn't rebound to pre-recession levels until January 1998. By the time the pink slips stopped, 23,400 jobs-14% of the industry-had been lost, according to Bureau of Labor Statistics figures.

"[Agencies] learned from the last recession-that people are the single biggest cost for an advertising agency, and if income falls, the only way to cut costs is to cut people," said O. Burtch Drake, president-CEO of the American Association of Advertising Agencies. He said agencies have told him most layoffs are done, though a few may come after the holidays.

The talk in advertising circles is that this ad recession is worse than the last one, raising the question of whether agency job cuts ultimately will surpass those seen last time. Yet while agency employment is coming off a record high, Mr. Drake and others don't expect the magnitude of layoffs seen in the early '90s because agencies are operating lean and have the business to support the staff.

Indeed, agency employment is back to the 1999 level-a logical place to be considering that ad spending also has fallen to near-1999 levels.

"I don't think anyone could stand to do any more cuts unless it comes [with an account loss]. Agencies are operating at skeleton staffs," said Amy Hoover, VP-recruiting at Talent Zoo, a national recruiter based in Atlanta.

One agency executive who asked not to be named agreed that the worst appears to be over and predicted the first half of 2002 would see slow improvement, while the back half would move more quickly. Even so, it will take time for hiring to keep pace. "Even when things improve, companies will be more cautious because they've been burned," he said. "They're still wearing Band-Aids."

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