The “R” word—recession—is something government officials and the media usually use carefully so as not to create a self-fulfilling prophecy. But by last week, the ongoing sub-prime mortgage meltdown, unprecedented volatility in the stock market, slowdowns in home buying and construction, and bad reports from the December shopping season caused media speculation about recessionary fears to spike.
In the same way the big television networks stopped calling results of elections in states before the polls close to avoid affecting the outcome, the media are cautioned not to hype fears of recession for fear of causing financial panics. But that doesn't mean the media ignore the issue.
Major financial media recently have been examining the issue of whether we are in a recession, and when and how one should “call” a recession. The definition of a recession is two consecutive quarters of negative growth in the gross domestic product, as measured by the National Bureau of Economic Research. But that means there is no official word until at least six months after we have actually entered one. That creates a quandary for the media and official government sources, who inevitably fill the void.
• The White House predicted that positive effects from the stimulus package it submitted to Congress will enable the economy to escape a recession.
• The New York Times covered the White House pronouncement but devoted more than half its story to Wall Street predictions of much slower growth and the strong possibility of a recession nevertheless.
• The Wall Street Journal's economic forecasting column reported that economists surveyed put the odds of a recession at 49%, up from only 23% last June, and that their confidence in Federal Reserve Board Chairman Ben Bernanke was down.
• Business Week's “Strategist,” in a column titled “The Recession Talk Your Board Should Have,” recommended that managers balance talk of cost-cutting with a plan to pursue growth opportunities should the recession not materialize or be less severe than expected.
• The Associated Press, rather than relying on official prognosticators, did a poll of consumers and reported that 61% of the public believes we are already in a recession.
• A personal finance columnist for USA Today explained the lag time in the official declaration of a recession and cautioned investors: “Watching for a recession? Don't wait for the last word.”
• In the heartland, the Peoria Journal Star published an online “Recession Handbook” that advised readers to “let Ben Bernanke” worry about whether we are actually in a recession but, like many other sites, offered practical advice on managing your money in a turndown.
We won't know for months if we are in an “official” recession. And the only consensus from the media is that, while it's too soon to know for sure if growth has actually turned negative, it's probably time to remind readers and viewers that it's never too soon to start planning for a rainy day.
From the media monitoring analysts at Cision.