With the advent of a new chairman of the Federal Reserve Board, many are contemplating the health of the economy and future actions needed by the Fed. So how is the economy doing, and has the coverage of its recovery been balanced? Consider some healthy economic results which were released in late November and early December 2005:
- The Gross Domestic Product (GDP), a key measure of economic expansion and contraction, increased by 4.3 percent in the third quarter in spite of the devastating hurricanes. Since the second quarter 2003, GDP has grown over 3 percent each quarter.
- The November unemployment rate was 5 percent, where the rate has been hovering since May. (The unemployment rate has since dropped to 4.7% in January).
- Continuing the solid monthly trend in 2004, 215,000 jobs were added to the economy in November.
- Productivity, an indicator of rising living standards, rose more than expected during the third quarter and increased at its highest rate in two years.
- Factory orders and orders for durable goods increased by 2.2 percent and 3.7 percent, respectively, in October.
- A survey of America's leading CEOs, the Business Roundtable's CEO Economic Outlook Survey, showed that they expect "broad strength in the economy moving into 2006." The CEO Economic Outlook Index for December 2005 was at 101.4. The index is "centered on 50, which means anything above 50 is expansion and anything below 50 is contraction."
So where were the glowing headlines about the economy?
A perusal the New York Times and the Chicago Tribune in late November and through mid-December revealed that almost all of these positive economic trends were found not in the headlines but on pages two or later in the business section.
The New York Times published one front page article, "Upbeat Signs Hold Cautions For the Future," where the writer hedged the recent results. After noting that gasoline prices had dropped, consumer confidence had increased, new home sales had hit a record, the stock market had finally risen, after remaining relatively flat for years, and factories were expecting a "happy holiday season," the New York Times wrote:
"By most measures, the economy appears to be doing fine. No, scratch that, it appears to be booming. But as always with the United States economy, it is not quite that simple. For every encouraging sign, there is an explanation."
Well, yes, there's always an explanation. And here's an obvious one: no economy is perfect.
Case in point: In 1996, with the economy humming along nicely, Alan Greenspan warned about irrational exuberance. In the speech where Greenspan coined the phrase he expressed concern about "unduly escalated asset values, which then become subject to unexpected and prolonged contractions."
Four years later in March 2000, the technology-heavy Nasdaq reached its peak, and the technology bubble began to lose gas. The economy dropped jobs in the months of June, August and October 2000, and job losses continued in 2001 through May 2003.
And this highlights the other obvious fact about economics - as a dynamic system, the economy waxes and wanes over time.
Certainly it would be ideal if the budget deficit was smaller and gas prices were lower. High gas prices, in particular, not only dampen consumer spending, they also impact manufacturers by driving up operating costs.
But one can always find fault with a component, sector or region. For instance, fourth quarter 2005 GDP growth at 1.1% did not meet expectations. Is it a sign of deterioration or just a bump in the road? According to Market Watch, Treasury Secretary John Snow predicted the result would be revised upward in future months. That isn't a reason, however, to paint over big improvements with small qualifiers.
Two days after the New York Times reported its story, the job surge in November was released, and, interestingly, both the New York Times and Chicago Tribune wrote articles -- not so much about the strength of the result -- but about President Bush's attempts to claim credit for it.
Is it any wonder than that a November poll by the American Research Group, a non-partisan polling organization that has conducted monthly economic surveys since 1985, showed 43 percent of Americans thought the economy was in a recession?
In fact, the lack of headlines prompted a search of the Lexis Nexis database to compare magazine articles written about the topic of economic recovery for President Clinton in 1993 and 1994 and for President Bush in 2004 and 2005; years when the economy began to show significant improvements for both presidents.
The search turned up 320 articles for President Clinton and 260 for President Bush. The searches produced articles published by well-known news magazines, financial publications as well as trade publications.
A review of the magazines revealed that far more articles were written about President Clinton in the weekly news magazines whereas the bulk of the articles written about President Bush were found in financial and trade magazines and in right-of-center publications like The National Review and The Weekly Standard.
Most glaring was the disparity in coverage by both US News and World Report and Time Magazine.
Not only did US News and World Report and Time Magazine publish significantly more articles about Clinton, but the tone of the articles was very different, as well.
As an example, Time Magazine published the following articles about economic recovery under President Clinton: "Overturning The Reagan Era," "Picking Up Speed," "Breaking Through," and "Who Needs a Boom?"
At a time when unemployment was at 6.5 percent, and GDP was forecasted to be 3 percent in 1994, Time Magazine wrote, "which would be no boom, but maybe something much better: a pace that could be sustained for a long time, keeping income and employment growing without igniting a new surge in inflation.... The circle (of spending, production and hiring) may not spin fast enough to produce a boom -- but who wants one anyway? Moderate, steady growth is better."
Now compare it to the one Time Magazine article ("How Real is the Squeeze?") written about economic recovery under President Bush. Keep in mind that at the time the article was written GDP grew 3.9 percent in the first quarter of 2004 (which was subsequently revised upward to 4.3 percent) and unemployment was at 5.6 percent.
"Jonathan Thornton finally found a job this spring after six months of unemployment. "My wife and I almost parted ways after 13 years because of the financial strain," he says. When he started work in April as a crane operator at a screw manufacturer in the Cleveland, Ohio, area, Thornton treated his wife Rita to a few little luxuries -- a day at the salon, an evening out with the girls. "My outlook has definitely brightened," he says. But Thornton's optimism goes only so far. His paycheck has grown, but the family is still just getting by.... There's supposed to be an economic recovery under way. But the numbers paint a confusing picture."
So where's the comment that "moderate, steady growth is better," particularly when the GDP growth and unemployment rate were better in 2004 than in 1993?
One would expect that a recovery from a recession would garner as much attention as any previous recovery and at least as much attention as the descent into one.
But it may be that the good news is finally reaching the public. The American Research Group found that in December only 28 percent of Americans believed the economy was in a recession, and 59 percent thought their financial situation was either "good," "very good," or "excellent."
That's good news, indeed!
Meg Kreikemeier is a writer and a former analyst at CNA Insurance.
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