Commentary & Analysis
Recovery Indicators Move to Half Here, Half There; Shipments and Profits Fall, Concerns Raised
US commercial printing shipments and profits are in a pattern that suggests another re-set of media communications strategy is underway. The national employment data looked great on the outside, but were disturbing on the inside… again. The latest publishing revenues suggest that content’s kingship status is not what everyone thinks it is.
By Dr. Joe Webb
Published: June 12, 2017
Recovery Indicators and Employment: Sideways Again
Three of the four Institute for Supply Management took a downturn last month, though they are at levels indicative of growth. The NASDAQ had a strong month as is about 300 points from an all-time inflation-adjusted high. Proprietors income, a measure of small business activity, is still at a lackluster annual growth rate below 2%.
While these indicators are mixed but show growth potential, there are still economic measures that have not reached or passed the levels at the beginning of the recession almost 10 years ago. Some moved higher than that level and fell back. Others like GDP improved, but at disappointing rates. The usual confirmation of economic direction has been lacking, and some indicators have behaved in a bizarre manner.
One of the strangest economic data measures is the unemployment rate. What used to be a reliable top-level indicator is distorted by the inputs for its calculation. In typical times, the denominator (the number of people in the civilian labor force) would move relatively stable manner. The reduction in the labor force is plain to see. One statistic to consider is the labor participation rate which has fallen to levels not seen since the late 1970s, prior to the major influx of women into the workforce, especially of college-educated women. It’s not like that trend reversed. Some attribute the participation rate decline as older workers retiring, but workers over 65 is the only group of workers that did not decline in the recession. Instead, there is great weakness in the 25 to 54 age group. That participation rate was 83.1% in December 2007, but is at 81.5%.
The economy is weak, a +2% economy, way below the post-WW2 +3.3% rate, and has been so for more than 15 years. If the economy is weak, how can the unemployment rate be 4.3%? Is this 4.3% the same as the 4.3% of the late 1990s? Definitely not.
The most recent employment report was nothing like a 4.3% report should be. These data are from the household survey, which is used to calculate the unemployment rate, includes self-employment, and does not double-count workers as the payroll survey can (and does for those with multiple jobs). In the last month,
- 608,000 people left the workforce
- the net decline in the workforce was -429,000
- employment went down by -233,000
- since March, the participation rate fell from 63% to 62.7%; since the recession, the rate sometimes reached 63% but did not break through; it should be about 66%; in December 2000, it was 67%.
I calculated where we are in employment after adjusting for the size of the labor force since the recession began. The labor force is always changing, and a key factor is population, of course. Since the beginning of the recession almost ten years ago,
- the number of self-employed workers is down -900,000;
- the economy is still short -623,000 full time workers
Publishing: Is There a Bottom?
The latest Quarterly Services Survey was released last week, and the publishing markets are having their problems but ad agencies have rebounded from a decline about two years ago. The chart shows the inflation-adjusted 4-quarter-moving-totals for these segments. That means you are always looking at a full year of data, with the newest quarter replacing the oldest one.
The chart is a reminder that the guardians and creators of high quality content, or so they claimed, were not so royal. Content was not king, at least not in the way they were providing it.
US Commercial Printing Shipments are Becoming Worrisome
Back in May, the Commerce Department issued their annual revisions to manufacturing shipments data, of which printing is an important component. The revisions were larger than expected and to the downside, which we discussed in the previous column. We also noted how the revisions affected our forecasting models in the recent webinar (free registration, followed by immediate access to video, audio, and slides) and provided updated forecasts.
April shipments were down -8.5% compared to 2016, and if you figure 2% for inflation, that’s more than a 10% decline. Many printing companies don’t notice that change because their local markets may already be sending them the volume of competitors that have closed. Their absorption of the volume of former competitors is part of the consolidation process. So that’s fine for the healthy printers able to benefit from that. For others, however, the decline in shipments should raise the caution flags.
Because month-to-month changes can be variable, we’ve been comparing data in six month periods as in the chart.
Note the declines for the November 2016-April 2017 period. The declines in the most recent months have been more than that.
The data for January to April 2017 compared to last year is next. The year-to-date is more than $1.7 billion less than last year on a current dollar basis.
Industry profits before interest and taxes were released last week. The chart shows shipments and profits on an annualized basis adjusted for inflation. Total industry profits are still having trouble getting over the $4 billion mark, a baseline from about 12 years ago.
What’s the problem? The largest printing companies, many of which specialized in magazines, catalogs, newspaper inserts, and other niches that required equipment suited to those applications have been holding profits down. The breakpoint of $25 million in assets is about a 100 or more employee-size company. Note how the smaller businesses have an average profit level of 6.45%, more than 7x that of the larger companies. Those bigger businesses have been beset by writeoffs, mainly of goodwill, for overpayment for acquisitions.
A Must-Read: Mary Meeker’s Slide Deck
Silicon Valley, technologists, investors, analysts, and others, wait for Mary Meeker’s slide deck about the status of the Internet. She covers new technologies, financial issues, applications, and conditions in key countries like India and China. The slide deck ballooned to 355 pages this year – all of it worth reading and pondering. The deck has already had almost 1.3 million downloads on the Slideshare page, but it is also available at on another site.
To get a sense of what you’re getting into, you can watch Meeker present some highlights from a recent event. Go to this page and scroll down near the bottom.