Economics & Research Blog
Catching Up with the Economy and Optimistic Old Media Guys
By Dr. Joe Webb
Published: November 18, 2008
It's time to catch up with some economic industry data. I'll explore these in more detail in my column on Monday, but here are the headlines and thoughts about them.
The press went ga-ga over a decline in the Producer Price Index, claiming inflation has subsided. The decline of of -4.8% since the last month was claimed to be a “record drop.” No matter. Prices are down because of lack of demand because of the downturn and because supply chains are full of previously purchased materials or contracts for them at higher prices. The year-to-year PPI rate for manufacturing industries is +7.1%. More importantly, the paper PPI is +8.6%, while prices charged for printing is +3.1%. Don't look for paper prices to go down: mills are closing because of lack of demand and an aggressive effort to manage capacity and therefore prices. So what if the price increases kill demand? Or have they not made the connection?
(NOTE added 11/19/2008: The Consumer Price Index (CPI) dropped by -1% last month but is +3.7% compared to this time last year. In Monday's column I will update the inflation adjustment factors companies need to use to adjust their financials for inflation).
Printing industry capacity utilization is down -8.7% compared to last year, according to the Federal Reserve report. I'm not a fan of this data series, but it's there and people seem to be interested in it. If you have inefficient equipment you can have very high utilization rates and no profits, and you can also have highly efficient equipment, a lower than typical utilization rate, and real profits. Southwest Airlines, the most profitable of airlines, has lower capacity utilization than its competitors. It proves there's a lot more to the bottom line than just staying busy.
Employment data continue to show the media shift. Compared to last year, periodical employment is +0.2% compared to last year. Book publishing employment is +1.0%. Big publishers are letting workers go, and they get the headlines. Micro and small publishers are propping up the employment numbers. It won't last forever. Many workers let go by big publishers may not hit the streets until January, and we won't see the effect on employment data until they are published in early March.
Newspaper employment is down -7.2%, graphic design production workers are down -9.4%. But public relations is up +2.8%. Public relations is a very interesting story that is getting very little attention, except by yours truly, it seems. They've gone from writing press releases and schmoozing with editors to playing a big role in developing the Internet presence of clients, and also expanding the use of offline media. Printers have never really cultivated relationships with PR professionals, always focusing on ad agencies or purchasing managers. Perhaps now is the time to change that. The major trade association is the Public Relations Society of America and it has numerous local chapters.
As far as the graphic design business, many of those newly released employees end up being freelancers. Many end up working for their previous employers. Printers should be on the lookout for some of these skilled workers, who can probably assist printers is creating new business.
In some of my latest speaking events, I've been exploring with attendees the difference between “creating business” and “getting business.” In today's economic situation, “creating business” is all the more important, yet high commission sales compensation plans often discourage the work needed to “create” business. “Getting” business relies on clients coming up with project ideas. “Creating” business is consultative with a firm client objective in mind. It works best with small and mid-size clients. This is all the more reason to be aligned with some of these “freed” designers.
Rupert Murdoch had some interesting comments in a speech in Sydney. He is so often dismissed by old guard media, but somehow outfoxes them (broadcast network name pun intended). Great quote about doom and gloomers who whine about how old media are slipping away and how bloggers aren't journalists and all that rot: “... among our journalistic friends are some misguided cynics who are too busy writing their own obituary to be excited by the opportunity.” The old guard of publishing is despondent, but an “old man” of publishing (Murdoch is in his 70s) is not. Strange, huh?