Real Economic Truth

Does the media accurately report economic news? Some are raising that question after the release of several highly anticipated economic reports last week.

The new data show that the United States is not in a recession, as the economy continues to grow. Fewer jobs have been lost than expected, with unemployment staying low at 5 percent. And the stock market has been surging over the last few months, with the Dow Jones Industrials average rising back over 13,000 last Thursday.

But many news articles are painting a different picture.

“The bruised economy limped through the first quarter of this year,” the Associated Press reported, “Ö as housing and credit problems forced people and businesses alike to hunker down.”

The article noted in the second paragraph that, “the statistic did not meet what economists consider the classic definition of a recession.”

Many articles have taken a similar tack in their reporting. A Nexis database search reveals that just 12 percent of articles on the GDP increase, during just the few days after it was announced, used the words “avoided,” “no,” or “not” within three words of “recession.”

A few news outlets that used the AP article changed the headline to include information about whether a recession was impending.

The Philadelphia Inquirer had “No recession yet: 1st-quarter GDP up a sluggish 0.6 pct” and FOXNews.com ran with “What Recession? First Quarter GDP Shows Modest But Better-Than-Expected Growth.”

But other media outlets modified the AP headline to make it more negative.

“Economy struggles in first quarter: Rising costs reduce spending, add to inflation pressure” was the headline for the Ventura County Star.

When contacted by FOX News, the AP reporter told us that she was unable to answer questions about her news story without the approval of her supervisor, who was unable to be reached.

Newspapers are also far more ready to discuss recession than in the past. A Nexis search of major U.S. newspapers and wires from January to March, 2008 showed 1,496 news stories that discussed the U.S. “in a recession” (excluding those stories where “avoided,” “no,” or “not” was within three words of “recession”). By contrast, during July to September, 2000, three months during the Clinton administration when the economy was actually shrinking, the same search found only 63 such stories.

While talk of recession is most common now, it has been going on for some time. Similar news searches indicate that this trend in news coverage has been growing for some time. Last year there were 59 stories during January to March, 102 stories from April to June, 87 stories during July to September, and 181 stories during October to December.

Prominent politicians have claimed that the United States is in fact in a recession. Typical statements include Barack Obama during his major economic address in March saying, “our economy is in a recession.” Hillary Clinton said that we are living through “George Bush’s Recession.” In late April, before the GDP numbers were released, even John McCain said, "I believe we are in a recession."

These claims may help explain why U.S. consumer confidence fell in April to its lowest level in 26 years.

The question is what was the news story this last week when, despite what seemed like all expectation, the economy actually continued to grow. Surely, if what is surprising is more likely to be newsworthy, the fact that the economy continued to grow despite what seemed like all expectations in the media would seem to be a focus of the coverage.

However, some, such as Rex Nutting, the bureau chief at the Wall Street Journal’s Market Watch, interpret the week’s news as being irrelevant for determining whether we are in a recession.

He argues that despite the growing economy and increased personal income “The U.S. economy is in a recession, most analysts say.” However, when asked who the "analysts" were, Nutting pointed to one recent survey but did acknowledge that there were other recent surveys of economists where clear majorities did not believe that the economy would shrink.

Nutting says that recessions can be called even when the economy is growing because “GDP is a pretty crude measurement of economic well-being.”

With the exception of one recession in 2001, however, recessions have always been called when the economy has been shrinking for two consecutive quarters. That recession still had plenty negative growth, occurring in three out of five nonconsecutive quarters from July, 2000 to September, 2001.

Since then, the economy has not yet had one quarter of negative growth. Yet, the extremely low consumer confidence numbers raise questions about whether the very negative media coverage of the economy is responsible for few Americans knowing that the economy is still growing.

* John Lott is the author of Freedomnomics and a senior research scientist at the University of Maryland. Maxim Lott is a student at the College of William & Mary.