Recession? What recession?

Posted by Matt Purdue

Any day now you’ll begin to hear the talk around the water cooler and see the ticker crawl on CNN asking “What recession?” The zeitgeist is sniffing around the notion that we never slipped into a true recession and aren’t about to. This idea’s not necessarily new. In March, economists at UCLA’s Anderson School were telling us they were “confident that the national economy was not in a recession through January 2008.” They then forecast “weak growth but no official recession in 2008.”

As we all should know, a recession is defined as two consecutive quarters of negative GDP growth. But recently the U.S. economy has been growing, albeit slowly. GDP grew by just 0.6 percent in the fourth quarter of 2007 and the first quarter of 2008. It’s funny to see how journalists reacted to these numbers. When the 1Q2007 statistics were released, reporters said the economy “nearly ground to a halt”  and told us that worries were mounting “that the country is on the verge of a recession.” Then, after the 1Q2008 numbers hit the street, journos described the situation in their lead paragraphs as “better-than-expected.”

Reading the business press today is like watching an Arena Football League game, with all the back-and-forth action and carnival-game scoring. Fact is that these journalists injected a lot of fear into the economy in recent months. Now they’re pointing to good news: increases in government spending, consumer spending, business inventories and residential housing starts. Record tax collections made the news too. But somewhere between us nearly grinding to a halt and better-than-expected growth, well over 300,000 Americans lost their jobs.

You can see what I’m getting at: The media drives the confidence bus. It’s never going to be possible to measure how many executives read dire predictions for the U.S. economy and then decided to cut headcount--even as they were beefing up inventory and building new apartment houses. But this does remind all of us to take even the most trusted news with a grain of salt and continue to educate ourselves so that we can make intelligent decisions.

Comments

[Gene C.]

Granted, journos tend to overplay their hands when reporting on economic data. But this business of blaming the media for the malady is by and large unsupportable, because over time the journalists surely get the trend right. It's observational, not causal. The worst example of blaming the media is of course in the housing market, where CEOs of public companies are now trying to blame reporters for their own blunders in overbuilding. By the way, if you want a good read on the econ from Corporate America, listen to purchasing managers and the finance guys. The CEOs are cheerleaders and will mislead you.