Recession fears impact Bay Area employment

SAN FRANCISCO: Some agencies in the Bay Area market are keeping tight reins on staffing as threats of a recession loom.

SAN FRANCISCO: Some agencies in the Bay Area market are keeping tight reins on staffing as threats of a recession loom.

In January, Fleishman-Hillard's San Francisco team laid off five staff members, including three junior- to senior-level employees from account teams, said Larry Kamer, West Coast regional director for Fleishman. The other staff layoffs came from individuals in the administrative department.

"I wouldn't say it was pegged to one account or a handful of accounts," Kamer noted. "I think there were a lot of factors that went into the decision. It's not something that we ever like to do, but we're committed to running a nimble business and it's something that we had to do."

The agency is optimistic about this year's revenue projections and opportunities in the Bay Area market though, he added.

Earlier this year, Porter Novelli also cut five San Francisco jobs - three from its account teams and two from administration - after the firm lost part of its HP business to Edelman A&R, confirmed Steve Spurgeon, MD of PN's San Francisco office.

"So, it's a bit of a stretch to isolate the layoffs," Spurgeon noted. "The agency business is fluid and goes up and down as budgets pump or deflate."

But since the initial round of cutbacks, the firm has hired former VP of corporate communications at Oracle, Bob Wynne, as EVP. It also posted six account team job openings for the San Francisco office, including several account executive positions.

One Bay Area agency CEO said temporary staff cuts were likely the effect of a market that learned a sobering lesson from the post-bubble-burst recession.

"The headlines are pushing people to be cautious," the CEO said.

Indeed, a new survey forecasts that 2008 will be another profitable year for the PR industry, but cautions that Bay Area firms have the lowest projected revenue growth, as well as the most concern surrounding economic uncertainties.

According to a nationwide survey conducted by StevensGouldPincus, 83% of the 156 responding agencies said client budgets have not been affected by the looming recession, and an overwhelming majority of firms expect an increase in revenues from last year. However, more than 84% of California-based agencies expect client budgets to hold steady.

Even so, the trend pointing toward Bay Area agencies proceeding gingerly amid uncertainty might be tied to the devastation the industry faced following the dot-com crash in 2002. And swirling rumors of tech giants cutting back on marketing expenditures have only exacerbated this regional anxiety.

For example, several industry sources told PRWeek that software giant Oracle reportedly slashed its marketing budget earlier this year, prompting its AOR Blanc & Otus to lay off staff members. Oracle declined to comment on the issue, and Anna Leonard, GM of Blanc & Otus, said that the agency does not comment on rumors.

Additionally, several industry sources said eBay has streamlined its communications department, but the company did not immediately return calls on the matter.

Gerard Corbett, former VP and GM of communications at Hitachi America, said last week two mid-level PR pros from midsize and boutique agencies contacted him because they were laid off after their firms lost clients.

"I think Bay Area companies are selectively downsizing," Corbett noted. "Even the tech companies that are doing well are having hiring freezes."

"Even though some [clients] might be reticent about certain operational expenses because of these economic uncertainties, they are not cutting PR budgets," Stevens said. Although the results do not explain why the Bay Area showed lower revenue projections or more apprehension surrounding the recession, the overall outlook for 2008 remains optimistic, he added.

Stevens added PR firms are better equipped to handle a downturn this year because the industry has streamlined operations and demonstrated its benefits to clients.

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