Mixed Messages

The press searches for good news in economic indicators

“I’m tired of feeling financially defeated all the time,” wrote Washington Post personal finance blogger Ylan Mui last week. Even those comparatively well-off are anxious and depressed about the recession to such an extent that they’re seeking therapy and escape from their economic worries. And, in recent weeks, it seems that the press is eager to help lift the nation out of its doldrums.

To lift the nations econo-blues, reporters are elevating various economic indicators to oracular status, and looking for any sign of good news in order to justify affixing a rare cheerful headline–“U.S. officials suggest worst of recession is over”—to an article about the economy. In a race to be the first to declare the recession over, the press has been tripping over itself to prognosticate the beginning of the end.

More headlines: Jobless Claims Suggest Recession’s End Could Be Near. Home Construction Sinks As Jobless Claims Brighten. Foreclosures fall in Kansas. San Francisco area home sales jump in March. Oh my.

Last week, The Wall Street Journal found hope in unemployment numbers:

Jobless claims have risen sharply during this recession, but shown some stabilization lately. Last week, newly filed claims plunged by a seasonally adjusted 53,000 to 610,000 – which some cautioned was a quirk of the timing of the Easter holiday – and the four-week average of new claims fell by 8,500 to 651,000, the series’ first decline in three months.

Forecasters love tracking jobless claims because they’re a timely read on the labor market, but also because they have historically been a great way to determine when declines in economic activity are nearing an end.

And yesterday, the Associated Press saw glimmers of light in a survey from the conservative National Association for Business Economics:

The latest quarterly survey by the National Association for Business Economics, set to be released Monday, indicates that the economy is at an inflection point, but not quite a turning point, said Sara Johnson, NABE’s lead analyst on the survey and an economist at IHS Global Insight.

However, she said, the results show the recession is abating.

“Key indicators — industry demand, employment, capital spending, and profitability — are still declining, but the breadth of decline is narrowing,” she said.

The results mirror announcements by the Federal Reserve last week that there were some faint signs of hope that the economy was improving. The Fed said five of its 12 regional banks reported the pace of economic decline was moderating.

Taken separately, reports on statistical fluctuations offer little insight into the economic recovery. A stall in new jobless claims, for example, hardly signifies recovery given that while fewer people may be losing their jobs, it doesn’t not mean that those same people have found new employment and are off the rolls. Lumped together, articles that collect multiple indicators into a single piece in the hopes of sighting the end of the recession wade into the dangerous territory of premature cheerleading. There’s nothing wrong with reporting good news positively, but the WSJ and AP, among others, often overemphasize the significance of individual data to paint a rosier-than-true picture.

Even the same statistical indicator can be taken positively or negatively: Take “Jobless Claims Inch Up” from the Pensacola News Journal, compared with “Whew, Jobless Rise Tiny” from the St. Petersburg Times. Both Florida papers cite the same numbers, but the framing is substantially different. This is why cherry-picking data is wrong, and encourages premature conclusions. There’s nothing wrong with reporting data, but to extrapolate meaning is a dangerous sport.

Writing in The New York Times last week, Paul Krugman urged caution among the “green shoots” and “glimmers of hope” the economy. Krugman cited a ten-year low in industrial production, yet another statistic and said: “The most you can say is that there are scattered signs that things are getting worse more slowly — that the economy isn’t plunging quite as fast as it was.”

Krugman’s writing presents a big bright blinking caution sign for the press. Despite the so-called good news in individual economic measures, it’s still too early to prognosticate just how and how soon this recession will abate. Editors who are concerned that readers may develop economy-story fatigue after months of bad news would do best to hunker down for the long haul. Given that the illusion of easy money was a contributing factor in this crisis, it is just as irresponsible to promote the narrative of an easy economic recovery, especially when regional reporting suggests that things are still getting worse. Before we declare the recession over, we should wait to see if these blips of good news last.

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Katia Bachko is on staff at The New Yorker.