CNBC : Tribble was right about unemployment
November 23, 2009
Evidently CNBC is coming to the same conclusion we did nearly a year ago that the U-6 is the real unemployment rate standard.
The problem is that the U-3 doesn’t count in the millions of people where their unemployment benefits have ran out, hence the U-3 is counting them as employed… even though they have no job! (go figure).
Also the U-3 doesn’t factor in the Accountant that had to take a part time job at McDonalds flipping hamburgers because he cannot find a real full time job, however the U-6 does.
Meaning that the real unemployment rate is isn’t 10.x percent, it’s actually at the great depression level of 17.5%.
We said this a year ago, CNBC is saying it now… as did one of the federal reserve heads.
In other words people, we are being had. It’s bad people, really bad. Unemployment is perhaps the biggest threat we have to an economic recovery… because let’s face it.. unemployed people don’t buy houses or cars.
Also worth noting, we don’t think this is going to recover unless we have another bubble… something that CNBC said today… and we said a year ago
From CNBC:
“”To me there’s no easy solution here,” says Michael Pento, chief economist at Delta Global Advisors. “Unless you create another bubble in which the economy can create jobs, then you’re not going to have growth. That’s the sad truth.”"
Go figure… we need another bubble people.. and the stimulus spending went into roads and bridges.. not another bubble.
Enjoy the new reality.
17.5% US Unemployment Rate
November 6, 2009
There’s a bug in the federal government formula for unemployment that is becoming more and more apparent as the current economic crisis continues.
The fact is according to Washington, you are employed even if you don’t have a job. The current U-3 Standard counts individuals that have completely lost their unemployment benefits and still not employed as currently employed and happy.
But according to John Doe’s measure, he’s unemployed until he finds a job.
The current unemployment rate is 17.5% , not 10.2% according to the official measure of the U-6 rate. That’s great depression levels circa 1932, during the depression the unemployment rate eventually hit 25%. Based on our current “growth” rate we might reach that level within the next 900 days.
We have argued time and time again that the U-6 needs to be the official rate.
It’s the closest standard we have (officially) to how it was counted in the 1930′s during the great depression. It’s also a much closer picture of what reality is on the ground. The fact that the U-3 drops people from the unemployment rate when they run out of benefits, not when the find a job is reason enough.
To make matters even more interesting, the government is close to calling the recession over, technically that’s correct.. in reality it’s not even close to being right, because of what they are using as the standard.
In this rough example: Let’s say that in 2006 the economic output of the US was 100, in 2007 it was 90, 2008 it was 70 and 2009 it’s 50. Then early in 2010 it goes to 51 (this is done actually every 90 days, not every year).
Technically on paper the recession is over, we moved up from 50 to 51…. but in reality we are still at half of our economic output of 2006.
90 days is not enough, to mark a recession should be spread out over 2 year marks, not 90 days marks.. to count unemployment it needs to be the U-6 not the U-3.
We are completely being lied to. This recession isn’t close to being over and the unemployment rate is nearly double what is being reported.
Enjoy the lie you are being fed. The problem is that businesses don’t believe the statistics, because if they did they would think the recession is over and be on hiring binge, clearly that’s not happening.
The Recession is over today
October 29, 2009
The recession is over, so why does everyone feel like it’s still getting worse? I figured I would explain to you what’s really wrong with calling this recession over.
They measure it from Quarter to Quarter, meaning every 90 days they look to see if the economy has improved from the previous 90 days. The problem with this is that it’s too short of a time period. It takes me more than 90 days to get paid from some of my Advertising Agency clients in this economy.
Unemployment isn’t actually a factor in measuring the end of a recession, but for simplicity sake we are going to use it in this example. So let’s say the unemployment rate is 5% .. then over the course of 2 years it goes to 11% …. if one month they say that the unemployment rate went to 10.9%, the recession is over…
Yea we’re near 11% unemployment… yes we are over double the unemployment rate as we were just 900 days ago.. but the recession is over.
90 days is not enough to measure if the economy is out of the great recession or not. The story from Reuters is misleading and it’s based on false data. Call us when the figures are close to where we were at the the start of the recession, not when we are showing a .000001% improvement from the bottom.
This recession isn’t over until we are back where we were back in 2006, 2007 .. with 5% unemployment, housing foreclosures at minimal and banking bailouts are not the norm.
If we need a stimulus plan, it means the recession isn’t over. Enjoy the false data.
WASHINGTON (Reuters) - The U.S. economy grew in the third quarter for the first time in a year, beating market expectations, as consumer spending and new home-building rebounded, signaling the end of the worst recession in 70 years.
Ad Agency in a recession - the good, bad and ugly
October 27, 2009
With layoffs being in the headlines this is going to be the classic textbook definition of a jobless recovery (if we really are in a recovery). Leaving us Advertising Agency types with a serious problem. The first being the fact that many consider our services optional, as payroll takes precedence, hence leaving our industry with perhaps one of the highest unemployment rates in the nation.
The second problem is if you are lucky enough to have a job, how do you advertise in light of 17% unemployment rate, consumer confidence hitting the toilet and bankruptcies the normal way of life.
Seriously like what is there to advertise to? I wouldn’t want to be a high end Rolex dealer in this economy, nor would I want to own a Porsche Dealership. “Honey the mortgage is late, but check out my new car I picked up!”
Granted some companies are relatively stable in this economy, no-frills Wal-mart, local grocery store, utilities but the problem overall is that we still have excess capacity for the new reality of decreased demand.
That includes your job.
Recently there was a study that put 200 job applicants for each position available in an ad agency. Honestly if you don’t do a good job, think about it.. there are 200 people (literally) willing to fill your spot within minutes.
This is the environment you are marketing and advertising in. Your client doesn’t want to pay much to get little. In other words your advertising isn’t about creative, it’s about ROI, period.
But there is a good side to this, a very good side. Many of the fortune 500 firms now exist because during the great depression they survived, so the chances are if you can make it though this great recession, your firm will be miles ahead of others when it’s finally over years from now.
The bad news to this is that no matter how good you’re doing, the chances are someone is running more efficiently, so there’s going to be competition. The face that the entire world has moved online rather than print or TV is causing much more disruption than what would normally occur. A talented guy with an 8 dollar a year domain registration and a 5 dollar a month hosting account could eventually start stealing your clients.. Don’t laugh.. I did. Armed with a pregnant wife and 700 dollars to my name I effectively have many on my client list that were formally with a holding company. This is revenue that you should have had, not me, as your firm had the relationship but not the technically skillset. Remember you’re reading this blog post, and the chances are some of your clients are as well.
The problem is that overtime more and more guys like me will show up, hence causing more and more disruption in the market place. You have to remember, if someone can do that with little resources, a similar guy with more resources could do much more damage.
Enjoy the mess.
Pink Slips flying at ad agency Ogilvy
October 26, 2009
Evidently Happy Monday at advertising agency Ogilvy, pink slips are flying. George Parker has the full leak.
Layoffs will contintue across the industry as this recession hasn’t seen it’s full potential in terms of unemployment. These people will be forced entering the workforce facing horrific unemployment and very low chances of finding a job quickly as some estimates have noted there are now nearly 200 applicants for each position in the advertising agency space.
This is the worst time to find yourself on the unemployment line. But hey no worries.. we’re sure that Sir Martin will still get his bonus for a job well done.
Days like today are what makes us wonder exactly what is going on, like completely rethink what we thought was the norm. Because clearly the norm isn’t working.
Ad Agency Draft/FCB loses ALL of Starbucks
October 22, 2009
George Parker is reporting that Draft/FCB has lost all of Starbucks, and pink slips are being handed out like Halloween candy at the advertising agency.
Evidently this has been swept under the rug as both Starbucks and Draft/FCB have refused to confirm or deny this report. If you have any information regarding this, please contact us your anonymity is guaranteed.
This is going to be a trend for some time, as the unemployment rate has reached 17% in the US, and since advertising is generally considered by companies as a discretionary spend, as urgent matters such as payroll tend to take precedence.
Let’s face it, Advertising Agencies in general are parasites, we only do well when other firms come up with good ideas that are sellable… then it’s our job to advertise those products that other people invented… so when they are having a rough time..so do we.
We are unsure how many people were canned at Draft/FCB , however the rumors are that it’s measured in the dozens.
BLS.GOV : Unemployment is 17%
October 21, 2009
The BLS.GOV site is reporting that the Unemployment rate has reached 17% in the US via the U-6 Standard. This standard is what was roughly used during the 1930′s, squarely placing us at 1931 in terms of the unemployment rate. By 1934 that rate jumped to a full 25%, meaning that 1 out of every 4 people was without a job, so at current job loss rates, within 900 days we will be at that 25% unemployment level. How do you market and advertise in such a recessionary environment?
We argued earlier this year that the U-6 needs to be the measure rather than the U-3, We were criticized as being off the wall, until a Federal Reserve head stated the same thing, hence validating our position that we have argued for months for.
Yes we were even called Peter Schiff (like it was an insult)
If you want to know who Peter is, here is a video dated 2006…. notice he was right then… in the middle of the housing boom and made Arthur Laffer look like an idiot within 18 months of it’s filming.
The point is that 17% is ugly, really ugly… and the chances are it will go to 20% or higher unless something stops it…. last time it was WWII … who knows what it will be this time….
Checklist to see if your advertising agency is in trouble
October 20, 2009
We figured we would spill it out for people, because based on recent comments we have a sinking feeling that many creative types need things spelled out for them. So we have created a simple checklist to see if your ad agency is in trouble.
1 - Is your ad agency part of a holding company?
Why is this question relevant? Well most holding company owned ad agencies have some serious accounting problems, mainly the way YOU are accounted for. It’s not your talent, it’s your personal ROI for the agency as a whole. See the guy that fires you won’t actually be located in your city, or in many cases even your country. He’s looking at a spreadsheet and is working hard to see who he can fire that won’t cost him money.
2 - Do you have many Universities or Hospitals as clients?
Huh? WTF kind of question is that? Accounts like that don’t pay well, there’s no massive growth there, like most Universities and Hospitals have been there for 100 years.. if they haven’t grown by now they how can they grow in the future? I mean literally sitting there for a century is not growth. Those places have seen the great depression, World War I, World War II… uhh wait…
Like if I have a bunch of stable clients on the roster that means I have a better chance of keeping my job? uhh… I want those clients in this economy. May take some time for many people to realize it, but growth isn’t the same as stability. I don’t care if we hit the mother of all great depressions, The hospitals will most likely still be there. Unlike Government Motors or Lehman Brothers. Now this shouldn’t be the entire mix of clients that you have, but a stabilizing force like that with your client roster will help get though ugly times like now.
3 - The ad agency I work for, what percentage of digital does the total revenue come from, and how does my agency define digital?
This is a hot topic, sometimes agencies push out “30% of our revenue is from digital” but ask them to define it and then ugly starts to show it’s face. If what they are saying is that 30% of their clients spend is for Google Adwords that isn’t digital, that’s a media purchase. Because there is a digital divide in terms of what is called digital because until someone can answer that question, you can’t provide an answer.
4 - Recent layoffs have crippled our agency, or did they help it make it though this mess?
This is a painful discussion, recently in an unrelated industry (an automaker) they needed parts on the assembly line. Until about 6 months ago there was an individual in charge of the computer system to specially order those parts. This individual (let’s call him John Doe) that earned roughly $60,000 a year was laid off with the assumption that the software was running the show and no more human intervention was needed. Well about a week ago they had to break an order into 2 parts for the same assembly run. Since the software wasn’t able to audit it, the order was hosed. Normally John would intervene and fix the problem and this problem would be fixed. But since John wasn’t there, they had to stop the assembly line until the issue was resolved, costing the company roughly 3 million.
Sounds like that 60k saved cost them $2,940,000 . So the question is, did your agency fire a John? The lack of foresight in that instance shows a lack of understanding of the process overall. Hence If your firm fired too many individuals like John, you’re looking at not a cost savings but rather a disaster that will accelerate though this recession as the agency will continue to lose needed revenue to fix problems rather than with a master plan to grow the company.
5 - Has your agency had many recent wins? Or are you defending and holding your existing client base?
This is actually highly important, if your ad agency is holding it’s own against others that is good, but it’s not the same as landing new business. Talking to the same guy in and out every day at the client puts things into a rut, it means that both you and your client are happy about the relationship. People tend to trust people that they have worked with for years. That being stated, landing new business is harder, and it must mean that your services that your firm is rendering must be so superior as the be able to overthrow the existing relationship. New business is superior to existing, it proves your firm is still relevant to the changing market place.
Thoughts?
Man sends out Farewell E-mail from Starcom
October 17, 2009
Our sources have stated that this e-mail was sent out as a final farewell after resigning from “Advertising Agency” Starcom. Roll on the floor funny (though the circumstances are not funny) was the approach this e-mail took. Congrats on making the best of a crumby situation.
Enjoy the mess.
Edit : we were told it was Leo Burnett initially, but after about 20 minutes on The Gimp, we were able to make out that it was in fact Starcom
October Effect — this is going to be ugly
October 1, 2009
On September 4th, we noted that the markets will crash first thing in October. With our post “What is an ad agency to do?”
Well low and behold, On the very first day of October, the markets crashed, The Dow was down 203.00 (2.09%) and all major indexes took a serious dump between 2-3% of total capitalization within a matter of 8 hours.
We hate to say “we told you so” but the fact is that we told you so. Documented is a trend called the October Effect. What that simply means is that the economy.. and for the most part the economy as a whole tends to crash in October.
Sometimes these crashes are utterly nasty, such as October 1929 when the market completely collapsed, allowing the full effect of the Great Depression to come rolling in. It’s not like this isn’t a common occurrence, In October 1987 the market completely folded and in more recent memory, last year in October of 2008, when the full effect of the Great Recession came to bear…
Today the market started it’s ugliness again, if I were to bet, I would say that the market will continue it’s historic trend.. and that trend is a triple black diamond ski slope for the rest of the month.
Put your money in your mattress.
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