The lasting effects of the credit crisis-fueled recession are widely over-stated. Too often pundits and others with a microphone (or mouse-pad) extrapolate conditions from the past quarter or two into the infinite future. In most cases, they will be proven wrong when they say that changes in behavior are permanent.
Time magazine's cover story, "the New Frugality," argues that tough times are changing forever the way Americans spend and save. We'll see. It's a little too early to say just yet. Remember in early March when we were told by every financial authority that stock-market dynamics had changed for good and that we should get used to lower annual returns when the bull market returns -- and don't expect to recover losses for 10-12 years? Six weeks later the S&P 500 is up 25% from the March 9 low. (But don't take that as a sign that big returns are back for good, either. This morning, a big selloff is sweeping the market. That could change by this afternoon ... or signal the Bear is back, maybe even for a whole week or more.)
The change you CAN believe in are fundamental shifts that were already underway Before the Fall of Lehman Brothers (BFLB). The auto industry, for example, was dealing with over-capacity, high commodity prices and other increasing costs including massive legacy health care obligations. The twin blows of very sharp spikes in fuel prices last summer followed by the liquidity crisis knocked the wheels off the auto companies -- and then the recession spread and sales really dried up. The result is a tremendous acceleration of change throughout the industry. And, this we can be certain of, the auto industry ISN"T going back to BFLB.
Another trend that the recession has accelerated is the demise of the newspaper. Craig's List and similar sites had already taken away the lion's share of a newspaper's most dependable revenue -- classified advertising. Circulation numbers were already in free-fall. But then the recession led to wide-spread cuts in corporate advertising dollars that have devastated display ad revenues, along with further reductions in subscriptions brought on by consumer's "new frugality."
In 2008 alone, 15% of newspaper newsroom jobs were eliminated, according to the NY Times in "J-Schools Play Catch-Up." The article details how journalism schools have added courses on the future of journalism in the Internet age including how-to courses such as "Multi-Media Story-telling." (Not sure what took so long. Force for Good readers will recall "Next Practices: Story-telling Wins Out," from March 2007).
The J-school's new-found emphasis on the future is long-overdue. Enrollment numbers continue to be strong at most university j-schools; many show increased enrollment since the economic clouds rolled in. Where are all those j-school grads going to work?
The next generation of grads are going to have to help find new solutions -- both in monetizing on-line news sites of major news organizations and in creating new outlets for professional journalists. And time is running short.
The future of news media is uncertain, to say the least. But, safe to say, it is never going back to the old way.
- Jon Harmon