Q: So what's up? A: The economy

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AdWatch, the midyear outlook conference presented by Ad Age and TNS Media Intelligence/CMR, convenes June 16, and prospects look surprisingly good. That continues a trend: The ad-market rebound began when AdWatch made its debut two years ago this month.

Well, not precisely. CMR data show the U.S. ad-spending turnaround began in May 2002, and spending last year broke a record. First-quarter spending this year grew a robust 10%, with healthy results from TV to online.

The recession ended and expansion began in November 2001, and economists expect gross domestic product this year to grow by some 4.6%. That's the strongest growth since Ronald Reagan won re-election in 1984.

The stock market has rocketed 47% from a post-bubble low in 2002. Among stocks on the Ad Age/Bloomberg AdMarket 50 index, 22 have increased since the 2000 market peak-including a majority of marketer stocks, seven of 17 media issues and one of seven agencies (Grey).

There's improving news on jobs. While media employment is down 10% from the ad industry's 2000 peak, jobs have increased slightly from a May 2003 nadir. Employment in advertising and related services-the government's catchall for ad agencies, PR, media reps and direct mail-has edged up since hitting bottom in January (though jobs are down 15% from 2000).

Connect the dots, and you see an economic recovery driven largely by consumer spending, with advertisers stepping up media spending to grab their share. Agencies, facing questions about business models and cost pressures, have yet to join the party.

We're in the 31st month of economic expansion. Since 1970, the average expansion has run 64 months. If that holds, July would mark the halfway point and we'd enter recession in March 2007. There are wild cards-inflation, interest rates, terrorism. But business today is stronger than we could have imagined in the dark days of 2001. That's good news.

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