Recession watch: Does anyone know what they’re talking about?

August 22, 2019
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A recession is coming, according to every outlet that covers the economy. Finance reporters are watching the trade war between the United States and China. They’re fretting over last week’s 800-point drop in the Dow Jones Industrial Average, which marked the worst day of 2019. They’re monitoring higher budget deficits and an inverted yield curve. On Monday, the National Association for Business Economics released a report that said a third of economists believe a slowing economy will tip into recession in 2021. “Is the US economy nearing a recession?” asked the Associated Press. The New York Times explained “How the Recession of 2020 could happen.” CNBC was coy: “We’re not predicting recession in 2020 but odds are growing.” 

“I think the biggest risk here is that we talk ourselves into a downturn and we talk about it so much that we end up with a self-fulfilling prophecy,” Julia Chatterley, an anchor and correspondent for CNN International, says. “I do think there is a tendency, perhaps, for certain aspects of the financial media to be very alarmist.”

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Myles Udland, a markets reporter at Yahoo Finance, agrees. “People are weaponizing pretty benign economic data, which is leading to a lot of irresponsible bullshit in the business media world,” he says. “You call up an economist and you ask, ‘Do you think there is going to be a recession?’ And they are going to say something like, ‘It is possible in the next 18 months.’ So your story is, like, economists say it is possible,” he explains. “If enough people just say the word ‘recession,’ then people start getting worried about a recession.”

Journalists grow worried, too. “Reporters, just like anybody else, are subject to groupthink,” Lydia DePillis, a trade and economic policy reporter at ProPublica, says. “The public sentiment around recession is influenced by the media, and that’s a very dangerous thing to get wrong.” 

How much do journalists really know about what the market will do, anyway? “If I could predict the start of a recession, then I probably wouldn’t be a journalist,” Simon Kennedy, the executive editor of Bloomberg Economics, says. “I would be living on an island somewhere and enjoying the wealth of being able to trade markets and making economic forecasts.” 

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The sources in recession stories are also just guessing. “There are studies about economic forecasting and its accuracy by economists—they get it wrong all the time,” DePillis says. “Most of the time, they don’t see a recession is coming and most predictions of recessions do not turn out to be true.” 

That happened only a few months ago, she remembers: “The end of last year, the stock market was tanking, the shutdown was happening, and the debt limit was around the corner. We thought the economy is going to crash, and it didn’t, and we recovered. I think we are just in an era where everybody is aware of what’s going on and they have stock apps on their phone, so people just get really worried.”

Dean Starkman, an investigative reporter and author of The Watchdog That Didn’t Bark: The Financial Crisis and the Disappearance of Investigative Journalism (2014), a book on how the press failed in its reporting on the 2008 financial crisis, tells CJR that there is more of a chance that the US won’t be in a recession by next year. In situations like these, there is always a “stampede to join the conventional wisdom,” Starkman says. “You really have to be disciplined to tie back your analysis to what the data is showing.”

Saqib Ahmed, a correspondent for the markets team at Reuters, cautions that sometimes the same data can be interpreted in different ways. People might look at the inverted yield curve, for instance, and assume that there will be a recession, “which could then lead to a self-fulfilling prediction,” he says. “It is very difficult to predict. Most people we talk to will tell us that there will be a recession at some point, but it gets more tricky when we ask them the timing of it.”

Ben Casselman, an economics reporter for the Times, says his goal is to interpret market trends for his readers, not tell the future. “Our job is not to be forecasters and create unnecessary panic,” he says. “The market can move a ton but the economy doesn’t change overnight. Just because there is a bad day in the market—or one month of bad data—doesn’t mean there is a reason to run out and start talking about how bad our economy is.” Besides, he adds, “The reality is that our economy is very good.” 

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Zainab Sultan is a former CJR Delacorte Fellow. Follow her on Twitter @ZainabSultan.