Economic outlook for 2010: better, but not good.Dear Subscriber:
Next year is going to be better than this year. Unfortunately, 2009 was "really, really awful."
That's the conclusion of Bill Witte, associate professor emeritus of economics at Indiana University and a member of the Kelley School of Business' annual Business Outlook Panel, who adds: "Better is not necessarily good."
"2010 is going to be acceptable, except for the fact that we're starting from extremely low levels. Things will be getting better, but they still won't be really good."
While some have declared that the national recession is over, the Kelley School panel said any economic progress will continue to be weakened by the aftermath of a historically severe downturn.
That suggests 2010 will be another challenging year for newsletter publishers. You can continue to expect resistance to promotional mailings, as businesses hoard cash and consumers struggle to pay down debt.
One way to deal with price resistance is to offer shorter-term subscriptions: six months as well as one year; perhaps even three-month subscriptions. This is an especially important technique for keeping loyal subscribers.
The downside is that some people will forget that they are renewing for just three or six months, so you'll have to explain that when they call in. What we expect you to find, however, is that subscribers will accept a simple explanation.
Output growth next year will be above 3%, the forecast says, but "hangover from the financial crisis will hold the strength of the recovery below what would normally be expected following such a deep downturn."
Although the worst appears to be behind us, the panel said it will take three to five years "to restore the luster to the economy and once again reach full employment."
Witte, who also co-directs the Center for Econometric Model Research at IU, pointed to two factors--cautious consumers who took dramatic hits to the values of their homes and other investments and small businesses still contending with tight credit--as the primary sources of an economic headwind in 2010.
"Households are probably going to continue being cautious with their spending. They'll certainly take advantage of bargains when they see them," he said, citing as an example the Cash for Clunkers program, which led to a surge in auto sales followed by a return to a lower level of purchases.
"Looking at the next year or two, as households rebuild their financial situation, consumption is just not going to be a roaring, robust source of economic growth," he said.
Credit Availability Hampered
Last weekend's bankruptcy of CIT Group Inc., a lending firm that traditionally served the small business sector, is another indication that credit markets are not yet a driving force in the recovery. Small businesses that depend on access to credit account for more than half of all new jobs created nationally.
"Credit availability for businesses - particularly small businesses - is still hampered," Witte said. "That means that small businesses are going to find it more difficult than they normally would, with a fully functional financial market, to finance investment and expansion of their businesses.
"If those small businesses are under financial pressure and find credit unavailable to finance their activities, inevitably it implies that the expansion's going to be hampered," he explained. "Of course, these two things feed off each other. If businesses aren't hiring, then the job market situation is not going to improve as much as it otherwise would. That in turn will probably make consumers more cautious."
Payrolls May Grow 2 Million Jobs in 2010
The forecast said the national labor market will lag behind output and unemployment will peak above 10%. Payrolls should add nearly 2 million jobs by year's end. Inflation will remain low through 2010 due to cautious consumer spending and continued high unemployment.
Here are other highlights from the forecast:
--The housing market will show some growth; but, like the overall economy, it will be muted. Home prices are expected to rise slowly in most markets. Nonresidential construction will be weighed down by excess supply and tight credit for firms seeking to buy or lease space.
--Interest rates will rise slightly, but remain low by historical standards, with some upward pressure possible late in the year. Mortgage rates will average 5% to 6%.
--Energy prices will be higher than 2009, but will remain far below the peak reached in 2008. Barring a severe supply disruption, crude oil prices will fluctuate between $60 and $90 per barrel.
--Business profits in most sectors will hold up due to major cost cutting that has occurred. The big gains in the stock market have already taken place; stock prices will grow more slowly in 2010.
--The global economy should expand by about 3% in 2010, with stronger growth in emerging economies, especially Asia. As in the U.S., global growth will fall short of the rates earlier in this decade. Along with some depreciation of the dollar, this will lead to growth in U.S. exports and possibly some further shrinkage in the trade deficit.
Looking past 2010, Witte said that he has major concerns.
"They come from the budget deficit and other actions that Washington seems to be on the verge of taking," he said, pointing to tax increases on business, costs of providing health care and regulatory actions. "It's an unsustainable situation, and beyond next year I'm very nervous."
Cal-OSHA Reporter's Plan to Keep Customers Who Lose Jobs
It's cheaper to keep a customer than to get a customer. We all know that, but given the lousy economy, most of us are losing subscribers, especially as loyal readers are laid off.
J. Dale Debber, publisher at Providence Publications, is addressing that issue directly, offering continuing subscriptions at no charge for those who have lost their jobs. Here's his offer, as posted on the Cal-OSHA Reporter website:
Since 1973, Cal-OSHA Reporter has been a friend and partner to California's occupational safety and health community. Through good times and bad, from natural disasters to Cal/OSHA "disengagement," it has provided important information to the community.
Now that California is feeling the full force of economic disaster, we want to support our friends in California chapters of the American Society of Safety Engineers (ASSE) and American Industrial Hygiene Association (AIHA) who have been laid off or who have been part of a reduction in force. An estimated 15% of California safety personnel have lost their jobs.
Unsung Heroes Of Industry
"A huge number of employers reduce safety staff in difficult times. We understand that the men and women of safety are the unsung heros of industry," says Dale Debber, publisher. "We will continue to support the members of this community who have so loyally supported us all these years. Although times are tough for us, too, we think this is one way we can help to keep our unemployed community ready to come back," he said.
Accordingly, Cal-OSHA Reporter will provide a free Premium Content subscription to out-of-work safety and industrial health people. We will deliver our weekly news to personal email addresses. If you have a friend, colleague or former co-worker in this situation, by all means let him/her know about this offer.
To take advantage of this offer, you must send us an email, with the following requirements:
* You are a California resident and member of either ASSE or AIHA.
* Tell us where you were last employed.
* Tell us when you were laid off or "riffed."
* Show that you are not earning money currently in the occupational safety and health profession.
* Recertify your employment status with us every 90 days.
To participate in this program, email firstname.lastname@example.org.
Debber tells us that after just a few days about a dozen people have accepted the offer.
DM Notebook: Hard Choices for Hard Times
What should subscription publishers do, faced with yet another year of a sub-par economy?
Rule #1 is you can't stop marketing. Things are unlikely to get better if new orders stop coming in. Even in the case of a strong title with an overall 80 percent renewal rate; if you had 100 subs last year, that will be 80 this year and 64 in 2010. Not hard to trace the effects of a trendline like that.
Publishers are looking for less expensive ways to market ... part of the explanation for the growth of e-mail and online marketing efforts. You can also stay in mail less expensively, testing letter packages or sample issues instead of FFTs, even postcard shots might have their place.
Printing costs. If business conditions are tough for you, they are also tough for almost everyone. Now might be a good time to look for good deals from suppliers--printers, envelope manufacturers. etc.
List costs. Well-known list broker Jay Schwedelson of Worldata says "If you are renting in excess of 20,000 names off of any list and not receiving some type of price discount, then you are being overcharged."
Staff costs. A number of things can be done. Raises go out the window, followed by bonuses and comany 401(K) contributions (as we said at the beginning, no one likes these things but newsletters are in good company with publications like the New York Times cutting pay and The Reader's Digest in bankruptcy.) I had thought "GM files for bankruptcy" would be the least likely headline I would see this year.
Staff furloughs are another option. In truth, an editor who can turn out an issue in five working days can do it in four if necessary.
Unfortunately many of these options are less available to the solo editor/publisher. Take less or no salary and postpone giving up the day job.
A publisher with staff also has to consider appearances if forced into some of the options listed above. Get rid of the company car. Skip the newsletter meetings in Las Vegas or Barbados. Yes, those can be very valuable, but how does it look to those left behind.
Advance renewal. Always a good source for a cash infusion. There is the argument about "easting the seed corn of the future" but that becomes academic if the more pressing question is whether there is going to be a "next year." Lee Bellinger at The American Sentinel does a strong package combining a special report offer with an advance renewal option.
Look for other sources for revenue. Are there things that, for whatever reasons, you have not done? Offer all your lists for rental. Put anything relevant you can find between covers as new special reports. Rent ride-along space in your carrier envelope. Do some paid speaking or consulting yourself if the opportunity presents itself. Some years ago at the association offering paid critiques of member promotional packages brought in a nice amount of new revenues.
It's important to remember that tough times don't last forever. For now, survival is Job 1. - Fred Goss