The Media’s Recession
An occasional theme here at Observations is the media and its penchant for biased reporting. My buddy Buffalo posted an article on this subject a few days ago, that particular story having to do with twisting data to show that motorcycle riding without a helmet is dangerous and the death rate is rising as a result of weakened laws mandating that riders wear helmets.
It really isn’t difficult to find examples of media mischief in reporting. Sometimes it is likely a matter of trying to attract viewers/listeners/readers, and sometimes there is a strong suspicion that other motives are behind the media’s malfeasance.
An example of the latter might be reflected in an AP story headlined “Huge job losses set off recession alarms.” The zeal with which the news outlets report negative economic news gives one the distinct impression that the US economy is in recession, and indeed, many reports state that unequivocally. It doesn’t help when presidential candidates say as much in their attempt to persuade voters that the economy is in a shambles and they are the only person on Earth that can fix it. The fact that the president can’t fix the economy is the subject of another piece, however.
The AP story begins, “It's no longer a question of recession or not. Now it's how deep and how long.” This point is supported by evidence such as that “the national unemployment rate climbed to 5.1 percent,” and that “job losses are nearing the staggering level of a quarter-million this year in just three months.”
To the uneducated eye this seems a reasonable deduction from the evidence presented. However, a little historical information and a basic understanding of the economy tell a different story.
For example, in the best of times the national unemployment rate is in the 4.8 percent range, and the rule of thumb is that when 5.0 percent of workers aren’t working, that is full employment. That might seem counter-intuitive, but “unemployed” does not always mean standing in soup lines, losing homes, and starving children. That five percent often is a matter of temporary unemployment as workers move from one job to another, or reflect those out of work for a short period of time. That 5.0 percent does not involve the same people today as it did in November.
The official measure of unemployed people in the U.S. as of January 2008 was 7.6 million, a rate of 4.9%, or full employment. Now that the unemployment rate has risen two-tenths of a percent to 5.1%—or one-tenth of a percent higher than the full employment rate—the US is in a recession, according to the AP story.
The second piece of evidence, that “job losses are nearing the staggering level of a quarter-million this year in just three months,” is also misleading. “InContext,” an online publication of Indiana University’s Kelly School of Business, says the following about unemployment: “… on average, we can expect a change of 300,000 or more in the number of people unemployed once every 10 months.” This shows that the jobless rate is subject to periodic swings, and while 250,000 in three months is a much quicker rate than 300,000 in ten months, it represents just three months. Next month could see a dramatic reduction of additional job loss, or even an increase in new jobs.
The technical definition of a recession is two consecutive quarters of negative economic growth. The housing market, the job market, and gasoline prices are three of many pieces of that equation. It doesn’t matter how many people think a recession is raging, and it doesn’t matter how many political candidates say we’re in a recession, there isn’t a recession until the specific terms of that definition are met.
There is no housing crisis, unemployment is still fairly low, and in constant prices gasoline is less expensive now than in the 80s. Is the US in a recession? No. Is it headed toward a recession? Maybe.
The more the media focuses on and magnifies these relatively tiny negative fluctuations in the housing market and the job market, the higher the number of uninformed or poorly informed people will be persuaded that the country is in a recession. The extent to which media malfeasance produces a sense of doom in the populace that leads to behavior that actually worsens the situation may mean that the media may create a recession or at least contribute to the downturn in the economy.
It isn’t the media’s job to try to persuade the American people that the economy is bad when it isn’t, or to elect one person instead of another, or that this war is worse than that war, or that this administration is worse than others, through biased, inaccurate news reporting. Yet that is what we see happening.