It’s been a month of distressing economic headlines for Canadians.

News of a volatile market and a soft dollar, paired with the Bank of Canada’s one-point interest rate hike, has many Canadians asking the question: Are we headed for another recession?

Within the advertising industry especially, it’s a topic that has a lot of people worried. For as the industry knows all too well, often one of the first things to get the axe during recessionary times is a company’s marketing plans.

Not everyone is feeling pessimistic, however. Although the warning flag is up – some economists point to British Columbia’s official recession status (two quarters of negative growth) as a sign of things to come – there are those that say the state of the industry is actually pretty healthy.

‘I don’t think there’s any evidence yet that the economy is in recession,’ says Rupert Brendon, president of the Institute of Canadian Advertising (ica). And while he says it’s far too early to predict what will happen next year, he characterizes this year’s fall spending as robust.

The issue for agencies, however, may have more to do with the weak Canadian dollar and how it affects multinational companies operating in Canada, says Brendon. ‘What does that do to the requirements on profits and what does that do to advertising?’ he asks.

Tony Miller, chair and ceo of MacLaren McCann in Toronto, says while no one’s used the R-word yet, thanks to all the unrest in the financial markets there’s definitely a little apprehension.

Miller says the lightweight loonie has put the pressure on a number of operating aspects of multinationals. ‘That, combined with general sense of unease about the financial outlook, has tempered enthusiasm for ’99,’ he says.

But he says the tough lessons gleaned from the last recession may actually put the industry in a better position to absorb any economic shocks this time around. ‘We were forced to streamline operations… while clients were doing the same thing,’ he says. ‘We’re fundamentally a better-run business.’

Canadian agencies were indeed forced to remove ‘the handlers, the bureaucrats and the office politicians,’ as Hugo Powell, then-president of Labatt Breweries of Canada called upon agencies to do in his infamous wake-up call to the industry back in 1993.

And, according to contacts at these smaller, leaner agencies today, there isn’t much else that can be cut.

‘If there was any fat, it was trimmed off,’ says Joseph Mullie, general manager of the Association of Quebec Advertising Agencies (aapq).

Mullie says that because the last recession ended so recently, the industry hasn’t had time to build up any extra padding. The work ethic that evolved out of the recession is still evident in business practices today, he says.

As for his agency’s members, Mullie says they’re adopting a ‘wait-and-see attitude.’

Not so with Vancouver agencies.

British Columbia is the only province officially in the midst of a recession and agencies there are busy preparing for whatever cards are dealt their way.

‘b.c. has definitely taken a turn for the worse,’ says Frank Palmer, president of Palmer Jarvis/DDB. ‘There’s no question that it’s starting to feel the pinch.’

In fact, Palmer says that he’s already discussed with current staff the fact that they must be prepared to work harder this coming year. ‘What I’m saying to our people right now is that, in order to meet our goals for 1999, we’re going to have to do about 35%-40% more volume,’ he says.

‘We are going to have to really turn up the dial big-time.’

The reason? Palmer says that in order to compensate for over-enthusiastic clients who rein in plans at the final hour, about 20% of the agency’s business has to be replaced every year – just to stay on even keel. It’s a challenging figure to maintain during the best of times, made even more difficult under the cloud of recession.

‘There’s no question that, if I look over the horizon with my little crystal ball, I can see that there is a shortage of new-business activity,’ says Palmer.

The key is staying on top of the agency’s accounts, he says. Because his agency’s compensation is based on the client’s sales, Palmer says it’s important to know how things are going. He says such a proactive attitude isn’t foreign to the agency which has had a retail mind-set since the day it began.

Perhaps the most bruising impact of the last recession, according to Palmer, was the demoralizing effect it had on staff. Besides cutting back new hires, the agency was forced to slash wages for a time in order to avoid firing people, says Palmer. ‘I don’t think we’re anywhere near that,’ he says, but adds that employees naturally worry about what’s going to happen when there’s even a whiff of recession in the air.

‘The biggest impact of the last recession – and it’s become a real issue now – was decreased hiring,’ agrees Andrea Southcott, managing director of Vancouver agency Bryant Fulton & Shee, and secretary of the Advertising Agency Association of British Columbia (aaabc).

According to Southcott, because there were so few people hired in intermediate positions at the time, there now aren’t enough seasoned pros to fit the agencies’ rosters. ‘You have to pay more for a scarcer resource,’ she says, ‘and that’s even tougher when you’re moving into a recession and having to watch budgets.’

Southcott, who worked in Toronto during the last recession, says that Vancouver enjoys a different market dynamic than its Upper Canadian counterpart. For example, she says that most Vancouver agencies operate on a fee basis, over commission, which gives them an edge against economic downturns. ‘We’ve learned to operate in a more accountable manner and a leaner manner,’ she says.

Like her industry colleagues, Southcott argues that advertising shouldn’t be put on the back burner when the economy falters. ‘For the short term, you can stop talking to the public but it does hurt you if you’re out for too long,’ she says. Obviously, the decision is industry-specific, she says. A brewery, for example, will still advertise because people aren’t likely to cut back on their beer consumption.

‘We will continue to advertise in good times and not- so-good times,’ says Bob Chant of Labatt Breweries, adding that only the monetary commitment (based on sales) may change. But even that may just shift from one segment to another for while the premium segment’s sales may drop, Chant says, the value segment will likely climb during rough economic cycles.

For General Motors of Canada, affordability is always an issue when it comes to buying a new car, says Greg Gibson, manager of public relations for the Oshawa, Ont.-based auto maker. While the car company is keeping its eye on current economic indicators, it has also adopted the business practice of not reacting to every little economic blip, he says.

‘In the past, you may have had a situation where lack of funding could cause a delay in introducing a new model,’ says Gibson. ‘No longer is that the case.’

Instead, the company recognizes that there’s a cyclical nature to car buying and that new models should be introduced at regular intervals.

That sort of attitude is one Howard Breen, president and ceo of Young & Rubicam, supports wholeheartedly.

Breen says that clients that stay the course, regardless of what they’re hearing in the press about a possible recession, are the ones that will enjoy a stronger brand over the long term.

‘I don’t think you should be swayed too easily by short-term markets up and downs,’ he says. ‘You should continue your planning to look for the longer term of what the consumer needs and what the brand needs to remain healthy and strong.’