We are all junkies for leading economic indicators. Whether it’s the first spring swallow or an uptick in orders for semi-conductor fabrication gear, we love to call the start of a new movement, if only because it signals the end of something more prosaic.
So it is now at what appears to be the end of a bad recession and the beginning of a new economic cycle. The aforementioned semi-conductor sector has done its thing along with house prices and general real estate activity is picking up.
But what about the trailing indicators — those things that take their time going down when the economy hits the skids? A notorious lagging indicator is always employment. Companies cut jobs as a last resort in the early stages of a downturn and cautiously re-hire after the first indicators of recovery are in full bloom.
Newspapers and TV talking heads meanwhile wring their hands about a “jobless recovery” as if the economy is spring loaded and able to bounce back with the seeming alacrity and speed of a toy. They are always surprised at employment latency and the headlines hardly vary from recovery to recovery.
I have my own economic indicator that I watch with guarded optimism at this time of a recovery and fright when the economy seems to be going south. It is marketing spending and a corollary is the number of people I know in marketing who are out of work and having difficulty finding it.
In late 2007 I began hearing whispers of a housing bubble getting ready to burst and through early 2008 the whispers turned to shouts but marketing spending seemed to be on pace. Later analysis showed that the recession actually began around the same time as the whispers but marketing spending was resilient. I recall having lunch with an already out of work CMO in May 2008 and we were musing about the arc of the economy that year.
“Do you think things will pick up in the second half (of 2008)?” he asked.
“I don’t know,” I said not wanting to deflate him. “I think we’ll see when we know about marketing spending after July first.”
My idea, which I explained to him, was that the marketing money being spent at that point was loaded into budgets that had a more or less calendar year cycle. The real test, coming after July first, would be whether companies with June 30 year ends would be as bullish or with six months more perspective, they might pull in their horns. The distinction is important for our industry because so many companies in the technology sector have June 30 year-ends, thus their marketing spending renews on July first.
At the time, my reading of the tea leaves advised caution because I had not seen the typical run up to a new spending year in the second quarter of 2008. In other words, fewer companies were asking for quotations, planning programs and the like. I was right. The second half of 2008 was slower than the first half and a lack-luster summer gave way to a wild autumn ride on Wall Street that erased doubts about the economy’s direction as well as untold fortunes and more than a few marketing jobs in the technology sector.
The first indicators of renewal have, indeed, been spotted both economy-wide and in the tech sector. I know of at least one out of work mid-level marketing person who got a job offer last week and several senior people now consulting so there’s that (highly unscientific, I know). But I still have not seen a general if cautious uptick in marketing spending plans. This would be the quarter for that to happen if companies are intent on starting the new year with any momentum.
Marketing costs money even in today’s highly automated and socialized marketing world. There is still time to make plans for early next year even if they get delayed and the first harbingers of revival lead me to think that we are about to see the first tentative steps. Those chip makers and house builders can’t all be wrong.