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A war with Iraq is not definite, but preparations are already under way at McKinney & Silver. The Raleigh advertising firm is notifying media outlets if the United States goes to war with Iraq, it wants to immediately stop all of its commercials and ads. The order is at the behest of clients such as Lands' End, Audi and the Nasdaq stock exchange, which want to see how a war goes before proceeding with costly advertising campaigns.

"We're all very cautious. We're all very anxious about what's ahead," said Brad Brinegar, McKinney & Silver's president and chief executive officer. "Anything that can be halted will be halted."

This is not good news for media outlets that rely on advertising revenues, nor is it a particularly good sign for businesses in general.

Consumer confidence is at its lowest level in 10 years. Gas prices are the highest in at least two decades. And businesses are reluctant to loosen their tight grip on spending.

The economic recovery that was supposed to have started by now still seems a long way off. Many economists blame the standstill on the possible war, which has loomed over businesses and consumers since last year.

"Everyone is just sitting on their hands right now waiting to see what happens," said John Rutledge, chairman of Rutledge Research, an advisory firm in Williamsburg, Va. "Businesses are buying routers and PCs -- cheap equipment -- but they're not buying systems or equipment with a capital 'E.' And they're not building factories or plants."

For many businesses, 2003 has started out a lot like 2002 and 2001. Technology is still cutting through the excesses of the 1990s. Productivity gains are outpacing revenue growth, leading to layoffs and hiring freezes. And bank reserves are flat, making business loans tough to get.

At HireNetworks, an executive search firm for technology companies, business is off 70 percent from the late 1990s. That's no better or worse than this time last year. Craig Stone, the chief executive officer, said war gives technology companies "one more reason to pull back." He said he won't add to his staff or raise his fees until the war is over.

"A lot of businesses are putting off hiring and investment decisions and maintaining extremely low inventories," said Mark Vitner, an economist for Wachovia Securities in Charlotte. "Without the war, we'd be gaining momentum, instead of muddling along like we have for the past year."

Dallas Hardenbrook, a recruiter for the N.C. Department of Commerce, was leading a German business owner on a tour of North Carolina last month when he got his first glimpse at what a war might do the economy. The German, who is considering opening a manufacturing plant in the state, told Hardenbrook that his plans are on hold if American soldiers invade Iraq. All Hardenbrook could do was assure him that the war probably wouldn't last long.

Economists say there can still be an economic recovery in the second half of the year. If the United States wages a short war that unseats Saddam Hussein with fewer than 1,000 coalition casualties, consumer and business confidence will soar, aided by tax cuts and increased military spending, according to Cynthia Latta and Patrick Newport of Global Insight, which has its headquarters in Waltham, Mass.

But businesses and consumers worry about all the things that could go wrong: The Iraqi army puts up heavier resistance than expected. The overthrow of Hussein does not end the fighting. Oil prices surge to $50 a barrel, up from the mid-$30s now. And the United States suffers another terrorist attack.

Mark Crow, general sales manager of Southern Exhibition Services in Durham, fears that travel to trade shows will stop, just as it did after the Sept. 11, 2001, attacks. Although the Persian Gulf War had little negative effect on his business, he expects problems with a second gulf war.

"I just think the whole terrorist threat makes a lot more people nervous," he said. "Also, the nation mostly supported what we were doing then. Now, there are just a lot of different opinions."

Already, the threat of war is taking a toll on businesses. Carly Fiorina, the chief executive officer of Hewlett-Packard, said Wednesday that war concerns are making businesses reluctant to buy computers and related equipment. Her comments echoed recent remarks by other companies, including J.D. Edwards & Co. and Apple Computer.

"We are in a very uncertain economy right now. The war just makes it more uncertain," said Steve Zelnak, chairman and chief executive officer of Raleigh-based Martin Marietta Materials.

Zelnak said his company will spend less on capital improvements than it did last year and do as little hiring as possible. That's not a direct result of the buildup to war, Zelnak said, but the war could cause the company to pull back even further.

"If we don't have a clear resolution in 90 to 120 days, I think people are going to be concerned," he said. "I would be concerned."

Vitner, the Wachovia economist, has revised his second-quarter economic outlook in response to the higher gas prices and drop in consumer confidence. He now predicts the U.S. economy will grow at an annual rate of 1 percent in the second quarter, down from 2.5 percent.

Vitner said restaurants, retailers and airlines will be hit hardest during a war, since Americans are likely to hunker down at home. Although that's sure to place more people in front of TVs and newspapers, media outlets will see their revenue drop as well. Advertisers are reluctant to hawk toothpaste or shoes at the onset of a war for fear of seeming callous.

"You're probably not going to see Nike's streaker ad on World News Tonight when they're talking about bombing in Iraq," said Richard French, president and chief executive officer of French/West/Vaughn, a public relations and advertising firm in Raleigh.

The prospect of losing thousands of dollars in ads comes as a double blow to media outlets, which are spending more to cover the buildup to war. WRAL-TV recently sent a reporter and photographer to the Middle East with Fort Bragg's 82nd Airborne Division.

"If we go to war, the networks will take control of the airwaves, and we'll see three to four days of coverage without commercials," said Quinn Koontz, general sales manager for the Raleigh station. "Obviously, that hurts."

Hardly a day goes by that Craig Isdahl doesn't talk with customers about the possibility of war. Isdahl, president of Dash Systems in Raleigh, which provides Web host services, said the war talk is not getting in the way of sales -- at least not yet -- but it is casting a shadow over people's moods.

"Three or four months ago, people were more upbeat and looking forward to a great year," Isdahl said. "Now people are hoping for some stability."

Copyright 2003 by The News & Observer Pub. Co.

About HireNetworks
HireNetworks defines recruiting for the new millennium. Our consultative business approach incorporates a well-defined recruiting process that promotes quality control and long-term partnerships. Our objective is to consistently match talent with the culture of an organization. Our focus is working with high-tech startups and emerging growth companies in information technology (wireless, software, Internet), material science (semiconductor), and life sciences (biotech, pharmaceutical) sectors.

HireNetworks Corporation brings a new dimension to the recruiting industry by building lasting relationships with technology companies. Partnerships are the guiding principle at HireNetworks. Our partnerships with high-tech companies are complemented by the partnerships we develop with candidates. Our two-way approach to building relationships is the hallmark of our success. By treating the companies we serve and candidates as equal partners, we create a win-win environment for everyone.