The main reason is that technological changes keep going, and they are often encouraged by slow times as information creators, disseminators, and users search for costs and methods that match their increasingly scarce resources of time and cash. Time becomes more scarce because companies downsize (10 employees at 40 hours a week is 400 hours; 8 employees is 320; just because there are 80 hours left does not mean that the same corporate functions disappear). This is one of the main reasons why printers can find some upside in outsourcing logistics (inventory & fulfillment) and deployment (mailing, e-mail services), and digital media (video, podcasts, and others).

Since the post-recession industry will be different than the industry was going into it, printers have to change their costs. This is not a hunkering down process, but a recognition that costs reflect the investment printers have made to offer certain services that were needed prior to the recession. Changing costs does not mean doing less, changing costs means making different investments targeted to what will be needed a year and three years from now. This is why investment should be as constant as possible, about the same amount in good and bad times. If it’s not, printing companies often make big investments before slowdowns and miss business upturns. You want to hit upturns with the best costs possible, just as much as you want to go into downturns with the best costs possible. The information marketplace doesn’t wait for printers to have new equipment or services.

This week, the University of Southern California Annenberg School’s Center for the Digital Future issued their 2009 report about Internet use (PDF Link). Here are some highlights:

The percentage of Americans who use the Internet has reached 80%

• 40% of those age 66+ go online, an increase from 29% in 2000
• The time Internet users spend online has grown in each year of the studies, and is now 17+ hours per week
• Light users spend an average of 2.8 hours per week online
• Heavy users who average 42 hours a week online
• 24% of American households have at least three computers
• The percentage of households with no computers continues to decline; only 15% do not have a computer
• Broadband is by far the dominant form of online service at home, nearly 80% of Internet users, more than double the level of five years ago, and eight times the percentage in 2000
• Access to the Internet by phone modem has dropped to 16%
• Two-thirds of home Internet users keep their broadband connection turned on most of the time while they are at home; only 20% percent do not

Just think of what these data will look like two years from now. What do printing entrepreneurs need to do to benefit from these trends rather than cowering in a corner having hunkered down hoping the 2005 printing industry comes back in 2010?

I use two trite sayings when I’m making presentations, and they get a good chuckle. The first is “ignore your competitors and stay ahead of your customers.” This is the essence of marketing and the purpose of strategic planning. By staying ahead of your customers, you automatically stay ahead of your competitors.

The second one is “when business is good, everyone looks like a genius; when business is bad, you have to be one.” This one has to be amended. When business is bad you have to be a genius entrepreneur. This does not mean you have to be a genius intellectual, you just need to be insightful. It often means that you have to become a master of the obvious, seeing things that are right in front of you that others are myopic about. It’s not easy, but it’s what print businesses need now. Are we up to the task?

This is quite different than some of the intervention that Greenspan orchestrated, though it was inflationary. Greenspan loosened too much on the way to 2000 to be sure that there was enough liquidity to prevent Y2K problems. He then pulled back too much and caused a post-2000 collapse. After 9/11, the injected liquidity allowed markets to stabilize after markets were closed for a week and world political situations were unstable.

This time around, the Fed is forgetting its role in creating a dollar that has the confidence of the markets and citizens. One pundit repeated the old line that holds quite true: capitalism without losses is like religion without sin. Instead of letting these poorly run businesses to die, as they should, and to inspire discipline in the lending and borrowing of money, where the borrower has to prove the ability to play to the loaner, and the loaner has to prove to the borrower that the deal is reasonable, we now have Ivy League MBA finance majors, skilled in Microsoft Excel, concocting theoretical risk management methods that prove to be just houses of cards built on houses of cards built on yet more houses of cards.

Declining oil and commodity prices should not be welcomed as one thinks. They are signs of deepening economic weakness, not a return to price sanity. Prices are thermometers, they are not ends in themselves. The money that went to commodities is now going elsewhere; most are still higher than last year, and higher prices since May are still working their way through production and inventory chains. The inflation data that comes out in a few months may look reasonable but they will be built on debris and carnage.

Monday’s industrial production and capacity data prove again that weakening the dollar to increase exports just creates serious problems because they are forced measures, not the natural actions of buyers and sellers.

My economic outlook, rather than one of muddling along at around 2% real GDP is becoming more pessimistic because of these price declines. Government actions will just prolong the problem and make it harder for resources to be reallocated. Muddling may be considered normal for the next five years.

In the end, it’s not the bankers and financiers that determine economic vitality. Credit is the grease that oils the machine of productivity. But it is still the production of goods and services that create wealth. When someone thins the oil, like the Fed is doing by feeding inflation, that productivity machine works far less efficiently. Be very careful in planning, and be certain that you are looking at real data and not inflation-distorted data. The Fed is the bartender who waters down the drinks as closing time gets nearer; they’re starting to water them down from the first drink served. Beware.

The Federal Reserve issued its industrial activity report for printing Monday; capacity utilization was down -7.5%. Gee, what a surprise: that matches the decline in June and July’s printing shipments. August’s real printing shipments should be close to awful. Can we get out of it? Our entrepreneurial spirits are being tested. Blaming the economy is not the answer and does not face the larger trends at work.

It is challenging, but the economic webinar next Wednesday will be more “interesting” that I would like it to be. I am quite curious about what I will end up saying. Pass the ibuprofen… don’t let anyone see the security blanket hiding under my desk.

This article originally appeared at WhatTheyThink.com’s Economics and Research Center. Dr. Joe Webb will be hosting his Q4 Economic Webinar next Wednesday, September 24th from 2:00 to 3:00PM Eastern Time. Sign up today to attend this free Webinar sponsored by MindFireInc.

Last month, U.S. commercial printing employment was below 600,000, which caught my attention. I went straight to my library of industry statistics. As best as I can determine using various government data, we’re at levels not seen since 1986 or 1987. Commercial printing employment peaked in mid-1998, almost reaching 830,000. It’s been quite a change from 1987 to now.

At that time, there were 70,000 employees in prepress trade shops (separators, platemakers, and trade typographers). Today, there are 25,000 with most of them are in some high-level publishing workflow, with nary a sense of what platemaking, separating, or typography was or might have been.

In 1987, there were 176,000 employees in book, magazine, and miscellaneous publishing; there are 300,000 today, augmented by another 50,000 or so micropublishing entrepreneurs.

Desktop publishing reduced the costs of production and stimulated the content creation process, and was a critical component of the march of new media. In 1987, graphic design did not even have its own industry classification code, as it was buried in something called “commercial art and design.” Many of these workers referred to themselves as “illustrators.” About 52,000 employees worked in graphic design firms then, with another 4000 or so as freelancers. Today, there are 73,000 employees in graphic design firms, plus another 90,000 freelancers, more than three times the workers.

Even advertising employment is higher. There are even 40,000 more workers in advertising than in 1987.

Commercial printing employment is now at 1987 levels, while publishing, design, and agencies have added more than 250,000 workers in the last 20 years. Not all of them are creative workers, of course. Without the ability to create content efficiently, even those workers who are not in content creation or content production positions owe their jobs to the creation process that is the reason for their employer’s existence.

The loss of prepress has hurt our industry’s financial performance, especially its profitability. In turn, the technological changes that undermined our industry created new opportunities. “Creative destruction” is a phrase used by economists to explain how technology and other factors destroy old ways of doing things and replace them with more productive methods, new products, and sometimes entirely new industries. Your perception of the effect depends on whether your skills are the ones being replaced. There is no doubt that the technologies and entrepreneurs that coalesced around desktop publishing two decades ago are still having ripple effects in our industry.

It is curious that the 230,000 loss in print workers in the last ten years is almost the same as the 250,000 new workers in content creation industries, isn’t it?

There is another important point. The new workers are more inclined to be freelance professionals, working as sole practitioners, than ever before. A $10,000 Mac workstation today is a powerful production tool, capable of producing sophisticated, high quality media in almost any format. They’re not always working alone, however. These workers are more likely to be working on a project basis rather than with a single employer, linked with other independent professionals, each with a unique expertise. Modern telecommunications and the Internet are only a hint of what is to come. Printing organizations need to recognize this empowered freelance revolution.

I am often asked what would draw more young people to the printing industry. I have always heard the same tired recommendations in my 30 years in the business, and we know they don’t matter. There is only one thing that does it: successful, dynamic, and growing companies that do interesting and exciting things. One of the attractions to content creation businesses is the newness that is the essence of their projects: there is always some aspect of the content that has never been done before. Creating content, even in its necessary repetitive production tasks, is more attractive to young workers. Working as freelance plays into millennial generation themes of independence, time flexibility, and geographic freedom.

Manufacturing by its nature may not be able to compete with that. Quality control programs, for example, are designed to create a repetitive and predictable sameness of results without regard to content. Small print businesses may not be able to compete with the attraction to the content creation businesses unless its owner or management is somewhat charismatic, emanating a sense that the risk of tagging along will be worth it in the long run.

In the end, falling under 600,000 employees is just a number. It’s a reminder of where we’ve been, and what may come. It’s a reminder of how much the communications business has changed, and will change. The question is whether our industry’s entrepreneurial spirits will create, individually and collectively, that successful, growing, dynamic, and intriguing culture that attracts workers and capital for these decades ahead.

Read more from Dr. Joe Webb in WhatTheyThink.com’s Economics and Research Center

The author of the letter to comments on the decline of press manufacturing in the U.S., especially at Goss. Blaming this on offshore competition is rather strange. Since 2000, the printing industry has lost $30 billion in annual revenues because of the Internet and other digital communications, and virtually no other cause. Newspapers have lost their cash cows, especially classified advertising, to the Internet because of businesses like Craigslist and eBay, among others. Morgan Stanley routinely shows a chart of more than 140 million classified ads in U.S. newspapers in the late 1990s, while today it is 100 million or lower. At the same time, eBay has more than 800 million items listed, and that’s just one company’s website.

As far as employment goes, this is the highest number of employed people in the U.S. in history. Household wealth is at record or near-record levels. While some look at service industries as a bad thing, one must remember that the biggest consumers of services are manufacturing companies. Very often labor statistics are misleading. For example, if a clerk processes payroll in a manufacturing plant, they are counted as a manufacturing worker. If the company switches to a payroll service like ADP, that shows up as a decline in manufacturing employment. Ditto for cafeteria workers: if a manufacturing business runs its own cafeteria, those workers are manufacturing workers. If they hire Amamark to do it, that shows as a decline in manufacturing workers and an increase in service workers, even though Aramark may have hired the same exact workers. Much of what was part of manufacturing companies is outsourced: financial services, maintenance, payroll and benefits services, human resource services, shipping, transportation, warehouse management, information services, are often handled by outside companies at lower cost with superior technologies and accountability, allowing manufacturing companies to handle their core businesses with greater efficiency.

Press manufacturing has always been an international business. After all, the first press was Gutenberg’s in Germany. But presses and press manufacturers go where the markets are. Right now, the growth markets for printing and publishing are in the emerging markets of Asia and Eastern Europe. In addition, offset lithography is gradually being replaced by other printing technologies. Companies like Goss and Heidelberg are competing for customer investment dollars today with the likes of Xerox, Hewlett Packard, and Oce, companies that would never have been considered competitors just ten years ago. More importantly, press purchases are determined by how much intellectual content is being printed. All publishing markets are grappling with a new communications industry and new communications markets that are intensely digital, and can be accessed by consumers any where and any time in any place.

It’s essential to understand that those trends have played more of a role in the reshaping and retructuring of the printing industry more than any other factor for the past seven years, and easily for the next seven. Newspapers and commercial printers are all looking for new and innovative ways to participate in the new global information distribution industry. It’s essential for suppliers to the industry to be partners in that endeavor for their own, and the industry’s, survival.

Visit our registration page to sign up. And if you can’t join us at that specific time, register anyway. You’ll be the first to receive the post-event download information so that you can listen at a later time.

The fact that there was a grain of truth to Google’s April Fools endeavor makes it all the more effective. I miss the fact that April Fools Day is a Sunday and we don’t have a WTT page for our own version this year. The Google folks, however, do not have the burden of a calendar.

The Gmail Paper landing page is just priceless in its humor. As one reads it, they know that it is clearly a joke, with inside jokes and also subtle comments about the power of electronic media. If you take their words seriously, however, you could create a pro and con list about why electronic media work and in the ways it is superior to print.

Just like Google’s search engine and e-mail service, Gmail Paper is free. “The cost of postage is offset with the help of relevant, targeted, unobtrusive advertisements, which will appear on the back of your Gmail Paper prints in red, bold, 36 pt Helvetica. No pop-ups, no flashy animations these are physically impossible in the paper medium.” Yes, a dig at the static nature of printed materials. There’s more.

E-mail has attachments, of course. So does Gmail Paper. “Photo attachments are printed on high-quality, glossy photo paper, and secured to your Gmail Paper with a paper clip. MP3 and WAV files will not be printed. We recommend maintaining copies of your non-paper Gmail in these cases.” I would imagine though, that an MP3 printout requires less paper than a WAV… that is if it could be done. But file compression is not a very humorous topic, as that last comment proves.

Paper in the new media world is a pollutant. Not so with Gmail Paper, however. The company that has “do no harm” in its motto has the solution. “Not a problem. Gmail Paper is made out of 96% post-consumer organic soybean sputum, and thus, actually helps the environment. For every Gmail Paper we produce, the environment gets incrementally healthier.”

So there we have it: paper can’t deliver rich media and is environmentally unsound. Ah, but let’s not be too serious and get on with enjoying the joke.

But think of how plumbers and bath products manufacturers feel after reading about Google’s TiSP system, which allows you to create a wireless broadband network by flushing various components using your commode-based entry point. A playful nudge to the home wiring broadband folks, and perhaps the folks at Kohler, too.

And a hat tip to blogger Adam Dewitz for alerting me to a site that has multiple April Fools technology lampoons this year.

On an inflation-adjusted basis, January was up $199 million compared to last year. This is the sixth month of inflation-adjusted positive comparisons to the prior year, and is +2.8% compared to last year.

It must be noted that the beginning of 2006 was very bad for our industry, and the comparisons are easy to beat. That is why it is important to compare the data to 2005 for a better perspective. On a current-dollar basis, January 2007 was $43 million better than 2005 (+0.6%), but down -$403 million on an inflation-adjusted basis (-5.2%).

Our longer term models for 2007 through 2009 are being updated, and we will have extended comments when they are posted later today.

Dr. Joe Webb, WTT Economics and Research Center

Click on the text below to see the comparisons with prior years.
January Shipments 2003-2007

On an inflation-adjusted basis, December shipments were up a hearty +3.4%, or +$348 million. On an inflation-adjusted basis, shipments for 2006 were down by -$1.3 billion. The last five months of the year, however, demonstrated real gains, well beyond any inflationary effects.

It must be remembered that 2005 was an exceptionally weak year, and that the industry is -$1.8 billion smaller than it was in 2004 on a current-dollar basis, and -$8 billion on an inflation adjusted basis.

Detailed analysis will appear in Mondays with Dr. Joe on February 5 at WhatTheyThink.com

Click on the image below to see it at full size.

GDP for 2006 was 3.4%. In perspective, it was 3.2% in 2005, and 3.9% for 2004.

The Fed meets today and they have two things to look at. First, Q4 was stronger than anticipated, holding up well with a decline in housing (the decline is nothing major: we’ve been at these levels before in economic expansions).

Second, the measure of inflation that is part of the GDP report was the lowest in 52 years, at -0.8%.

What does the Fed do? Declare victory over inflation and go home (I hope so). No, they will say that they are still concerned about inflation and will stay where they are.

Many “talking heads” think that they will raise rates, not now, but sometime this year. I’m still not in that camp. I expect that the economy will slow, but my expectation that they will lower rates in the end of the second quarter looks like it will be dead wrong. I still see weakness in certain macro indicators like a shrinking trade deficit.

We get lots more economic data today and tomorrow, and I’ll pull it all together in Monday’s column.

Friday we get December printing shipments. Look for a quick take on WTT and also a note in this blog.

The number of planned job cuts in the U.S. media sector surged 88 percent last year and that trend will likely continue as readers shift from print to online services, a study on Thursday showed.

For all of last year, the media industry announced 17,809 job cuts, up sizably from the 9,453 cuts announced the prior year, according to the job outplacement tracking firm Challenger, Gray & Christmas.

It is horribly out of context. First of all, CG&C is a famous outplacement firm that handles searches for the world’s biggest companies, and its top executives. Years ago, they started to track announced corporate layoffs. It brings them great publicity, and they use it very well, supplying talking heads for all kinds of news broadcasts. Occasionally, however, some context is needed, which is why Dr. Joe is sometimes so sorely needed, especially in this case.

Non-newspaper publishing employment is up by 12,000, according to the BLS. Publishing overall, including newspapers is flat, only up 500-800 employees. And that’s the point: it’s flat. Seems like lots of these publishing folks are finding jobs in their own publishing industry, and often a different corner of it. One company’s layoff is someone else’s new hire. Remember, these employees can also exit the workforce, change industries, but usually work for a smaller and more nimble company in the same or related industry. Ad agency employment, for example, is up by more than 10,000.

Why is it that Dr. Doom is the optimist for once?