The "Recession" is a Media Myth

[pensacola tiger 0]

http://www.foxnews.com/story/0,2933,343671,00.html

During the 2000 election, with Bill Clinton as president, the economy was viewed through rose-colored glasses. According to polls, voters didn’t realize that the country was in a recession. Although the economy started shrinking in July 2000, most Americans through the entire year thought that the economy was fine.

But over the last half-year, the media and politicians have said we were in a recession even while the economy was still growing.

Gas prices are going up. The economy is slowing. Talk of recession is seemingly everywhere. While the majority of people rate their personal finances positively, consumer confidence in the economy has plunged to a 16-year low, well below what it was during the last year of the Clinton administration when we were in a recession.

A Nexis search on news stories during the three-month period from July 2000 through September 2000 using the keywords “economy recession US” produces 1,388. By contrast, the same search over just the last month finds 3,166. Or, even more telling, take the three months from July through September last year, when the GDP was growing at a phenomenal 4.9 percent. The same type of Google search shows 2,475 news stories.

Over 78 percent more negative news stories discussed a recession when the economy under a Republican was soaring than occurred under a Democrat when the economy was shrinking.

A little perspective on the economy would be helpful. The average unemployment rate during President Clinton was 5.2 percent. The average under President George W. Bush is just slightly below 5.2. The current unemployment rate is4.8 percent, almost half a percentage point lower than these averages.

The average inflation rate under Clinton was 2.6 percent, under Bush it is 2.7 percent. Indeed, one has to go back to the Kennedy administration to find a lower average rate. True the inflation rate over the last year has gone up to 4 percent, but that is still lower than the average inflation rate under all the presidents from Nixon through Bush’s father.

Gas prices are indeed up 33 percent over the last year, but to get an average of 4 percent means that lots of other prices must have stayed the same or gone down. On other fronts, seasonally adjusted civilian employment is 650,000 people greater than it was a year ago. Personal income grew at a strong half of one percent in just February.

Despite all that, this last week, Barack Obama proclaimed “As most experts know, our economy is in a recession.” Hillary Clinton made similar staements last fall. Yet, as any economist knows, a recession is two consecutive quarters of negative growth, and we haven’t even had one single quarter of negative growth reported. The economy slowed down significantly during the end of last year, but that was after a sizzling annual GDP growth rate of 4.9 percent in the third quarter.

Housing has obviously been a big drag on the economy, but many other sectors of the economy, such as exports, have been doing well, some extremely well. For example, aerospace exports increased by over 13 percent last year.

The media’s focus on the negative side of everything surely helps explain people’s pessimism. In a recent interview Fox’s Neil Cavuto claimed this bias “is all part of the media’s plan to get a Democrat in the White House.”

Indeed, research has indicated that media bias is real. Kevin Hassett and I looked at 12,620 newspaper and wire service headlines from 1985 through 2004 for stories on the release of official government releasing numbers on the unemployment rate, number of people employed, gross domestic product (GDP), retail sales, and durable goods.

Even after accounting for how well the economy was doing (e.g., what the unemployment rate was and whether it was going up or down), there was still a big difference in how positive or negative the headlines were. Democratic presidents got about 15 percent more positive headlines than Republicans for the same economic news.

Yet, the hysteria created by this coverage can have another cost. It creates pressure for government to “do something,” even if that rush to do something actually ends up hurting the economy. For example, Obama's promises last week “to amend our bankruptcy laws so families aren't forced to stick to the terms of a home loan” will only further drive down the value of mortgage-backed securities, making any unstable financial institutions that hold them even more likely to fail. In the long term, who is going to want to loan money when the contract can be rewritten at a later date?

The news media have generated a lot of fear. Ben Stein has a point when he says “The actual economic conditions are not that bad. I think if we have a recession, if we have a serious recession, a great deal will lie at the media’s feet.” Hopefully a little perspective will enter the picture before even more harm is done.

John Lott is the author of Freedomnomics and a senior research scientist at the University of Maryland.

[BamaGrad03 0]

This one won't get too many responses.

Yet further backing of Otter's assertions last week.

[RunInRed 18,317]

Consider the source.

Also, latest jobs report has unemployment at 5.1 with estimates of 5.5 by year end. And when Bernanke comes out earlier in the week talking about a recession, it's clearly not just the "liberals". You guys truly are unbelievable. Iraq is wonderful, the economy hasn't been better, healthcare is fine, energy is not a problem, global warming is an al gore myth ... let's elect John McSame and have a Bush 3rd term. Thank G_d the majority of the country disagrees.

[AUTiger1 0]

This one won't get too many responses.

Yet further backing of Otter's assertions last week.

Either that or we will have to read about how since it is a foxnews article that is totally false and that it is slanted to the right.

[pensacola tiger 0]

This one won't get too many responses.

Yet further backing of Otter's assertions last week.

Either that or we will have to read about how since it is a foxnews article that is totally false and that it is slanted to the right.

Haha...see above. And I don't remember that article mentioning global warming, Iraq, healthcare, energy, liberals or John McCain. It was about media bias as it relates to Democrats, Republicans, and the economy. And as an aside to runinred, I do believe that 5.1 is just below 5.2 which is what the article said. As for estimates, they are just that, estimates not fact. Get off your high horse. You can check the numbers quoted. Are they estimates or facts? And your statement that the majority of the country agrees with you is something less than an estimate. It may turn out to be fact but we won't know until November. And I tend to estimate that you are wrong in that regard. Also, why is it that you write G_d rather than God? Just wondered. Either you are a believer and yet won't type the word or you are an unbeliever in which case why thank God? No need to answer that as it's none of my business, just a thought I had.

[BamaGrad03 0]

Unemployment at 5.1%...still lower than Clinton's average tenure...what has been labled 8 years of great economoic prosperity.

How do you reconcile 5.1 being horrible and Clinton's 5.2?

And quoting the "majority of the country" as your source for support on economic issues...hardly a strong move as the "majority of the country" doesn't even know how to define a recession, and are grossly under-educated in all things economics.

[AUTiger1 0]

This one won't get too many responses.

Yet further backing of Otter's assertions last week.

Either that or we will have to read about how since it is a foxnews article that is totally false and that it is slanted to the right.

Haha...see above. And I don't remember that article mentioning global warming, Iraq, healthcare, energy, liberals or John McCain. It was about media bias as it relates to Democrats, Republicans, and the economy. And as an aside to runinred, I do believe that 5.1 is just below 5.2 which is what the article said. As for estimates, they are just that, estimates not fact. Get off your high horse. You can check the numbers quoted. Are they estimates or facts? And your statement that the majority of the country agrees with you is something less than an estimate. It may turn out to be fact but we won't know until November. And I tend to estimate that you are wrong in that regard. Also, why is it that you write G_d rather than God? Just wondered. Either you are a believer and yet won't type the word or you are an unbeliever in which case why thank God? No need to answer that as it's none of my business, just a thought I had.

Yeah, I guess we were replying at the same time, but I called it. But yet at the same time it is fine to post articles from CNBC, MSN, Yahoo, or CNN, b/c they would never put their left spin on it. While I will admit that foxnews does lean to the right, I still find them to be just about as fair. The left will never say that though. They will claim that Hannity is a hate monger and that he is not fair, but yet will never say anything about the little dweeb that sits beside him and the way he treats his guest.

[RunInRed 18,317]

Unemployment at 5.1%...still lower than Clinton's average tenure...what has been labled 8 years of great economoic prosperity.

How do you reconcile 5.1 being horrible and Clinton's 5.2?

And quoting the "majority of the country" as your source for support on economic issues...hardly a strong move as the "majority of the country" doesn't even know how to define a recession, and are grossly under-educated in all things economics.

I don't necessarily think it's horrible nor do I think it's the tell all factor. Yet I do think the economy is contracting.

[BamaGrad03 0]

I don't necessarily think it's horrible nor do I think it's the tell all factor. Yet I do think the economy is contracting.

I don't doubt we are having a little pullback. But after 5 years of overwhelming economic prosperity, a little contraction is to be expected.

You can't ALWAYS add jobs, you can't ALWAYS have the financial sector explode.

Economics is cyclical...and the sooner people realize that, the sooner they stop freaking out. The doomsday scenarios painted by the media now are outlandish.

[TexasTiger 14,273]

Unemployment at 5.1%...still lower than Clinton's average tenure...what has been labled 8 years of great economoic prosperity.

How do you reconcile 5.1 being horrible and Clinton's 5.2?

Okay, I'm going to answer your question one more time. My prediction is that you will ignore the facts again, and repeat this same crap in a few months.

Clinton inherited 8.0% unemployment. It steadily went down. When it hit 5.2% that meant it had dropped 2.8%. In Dec. of 2000, it was 3.7%, meaning it had dropped 4.3% from when he took office. Unemployment has increased under Bush, it decreased under Clinton. I know you have an inferior education, BG, but this isn't that complicated to understand if you're smarter than a 5th 1st grader.

http://www.econstats.com/IMF/IFS_USA1_67R__.htm

[BamaGrad03 0]

Clinton inherited 8.0% unemployment. It steadily went down. When it hit 5.2% that meant it had dropped 2.8%. In Dec. of 2000, it was 3.7%, meaning it had dropped 4.3% from when he took office. Unemployment has increased under Bush, it decreased under Clinton. I know you have an inferior education, BG, but this isn't that complicated to understand if you're smarter than a 5th 1st grader.

Clinton's economy also benefitted from an overly inflated internet boom...and we were in a recession during the end of his tenure when the economy was righting itself during the internet bubble.

Bush has had the unemployment rate down as well but he had to inherit the internet bubble, endure 9/11, etc.

For the last 5 years, the dow, jobless rate, and overall economy have been MORE than strong. And all of it founded on real jobs, not some kid raising 2M in VC because he knows how to turn on a computer.

And given those numbers you posted...and considering other numbers past...wouldn't you say that even a 5.2% unemployment rate is a historically very low number...and not cause for all the doomsday coverage?

You can attack my intelligence all you want, but it doesn't make you better than anyone...nor does it make you more informed.

[RunInRed 18,317]

Clinton inherited 8.0% unemployment. It steadily went down. When it hit 5.2% that meant it had dropped 2.8%. In Dec. of 2000, it was 3.7%, meaning it had dropped 4.3% from when he took office. Unemployment has increased under Bush, it decreased under Clinton. I know you have an inferior education, BG, but this isn't that complicated to understand if you're smarter than a 5th 1st grader.

Clinton's economy also benefitted from an overly inflated internet boom...and we were in a recession during the end of his tenure when the economy was righting itself during the internet bubble.

Bush has had the unemployment rate down as well but he had to inherit the internet bubble, endure 9/11, etc.

For the last 5 years, the dow, jobless rate, and overall economy have been MORE than strong. And all of it founded on real jobs, not some kid raising 2M in VC because he knows how to turn on a computer.

You can attack my intelligence all you want, but it doesn't make you better than anyone...nor does it make you more informed.

housing boom?

[BamaGrad03 0]

housing boom?

I don't understand the "question"...hopefully you weren't trying to equate the over inflated housing market to the false economic perception given during the internet boom.

Certainly you know better than that.

[TexasTiger 14,273]

Clinton inherited 8.0% unemployment. It steadily went down. When it hit 5.2% that meant it had dropped 2.8%. In Dec. of 2000, it was 3.7%, meaning it had dropped 4.3% from when he took office. Unemployment has increased under Bush, it decreased under Clinton. I know you have an inferior education, BG, but this isn't that complicated to understand if you're smarter than a 5th 1st grader.

Clinton's economy also benefitted from an overly inflated internet boom...and we were in a recession during the end of his tenure when the economy was righting itself during the internet bubble.

Bush has had the unemployment rate down as well but he had to inherit the internet bubble, endure 9/11, etc.

For the last 5 years, the dow, jobless rate, and overall economy have been MORE than strong. And all of it founded on real jobs, not some kid raising 2M in VC because he knows how to turn on a computer.

And given those numbers you posted...and considering other numbers past...wouldn't you say that even a 5.2% unemployment rate is a historically very low number...and not cause for all the doomsday coverage?

You can attack my intelligence all you want, but it doesn't make you better than anyone...nor does it make you more informed.

I attacked your education. Not your intelligence.

Upthread you talk about defining recession. We were not in a recession at the end of Clinton's tenure. But I'm not knocking a 5.2% unemployment rate. I'm knocking the constant misplaced comparisons to the rate under Clinton.

Bush's economy has been artificially inflated by a real estate bubble that was created by the subprime mortgage debacle. The impact of this is far worse than the internet bubble.

Plus, Clinton and Bush have taken deficits in opposite directions.

[RunInRed 18,317]

Bush's economy has been artificially inflated by a real estate bubble that was created by the subprime mortgage debacle. The impact of this is far worse than the internet bubble.

Plus, Clinton and Bush have taken deficits in opposite directions.

Bingo.

[BamaGrad03 0]

Bush's economy has been artificially inflated by a real estate bubble that was created by the subprime mortgage debacle. The impact of this is far worse than the internet bubble.

You couldn't be more wrong on this. Simple example...look at what the dow has done since the subprime problem hit...remained steady.

The bottom fell out of the stock market when the internet bubble burst. Not only were thousands upon thousands of jobs lost (see unemployment rate jumping 1% between Dec 2000 and Jan 2001)...but anyone who owned stock got freaking killed in the market.

I will agree with you on the defecit. That's one thing Dems and Reps should be able to agree on. Bush has spent more than he should, and Clinton did a good job of shrinking it...

[TexasTiger 14,273]

housing boom?

I don't understand the "question"...hopefully you weren't trying to equate the over inflated housing market to the false economic perception given during the internet boom.

Certainly you know better than that.

You live in a mythical world.

[RunInRed 18,317]

Bush's economy has been artificially inflated by a real estate bubble that was created by the subprime mortgage debacle. The impact of this is far worse than the internet bubble.

You couldn't be more wrong on this. Simple example...look at what the dow has done since the subprime problem hit...remained steady.

The bottom fell out of the stock market when the internet bubble burst. Not only were thousands upon thousands of jobs lost (see unemployment rate jumping 1% between Dec 2000 and Jan 2001)...but anyone who owned stock got freaking killed in the market.

I will agree with you on the defecit. That's one thing Dems and Reps should be able to agree on. Bush has spent more than he should, and Clinton did a good job of shrinking it...

How many jobs do you think have been lost in the mortgage industry, the home building industry, the financial sector, etc. ? We are still seeing the effects, as March's latest jobs numbers proved.

[BamaGrad03 0]

From Wikipedia:

The Dot-com bubble crash wiped out $5 trillion in market value of technology companies from March 2000 to October 2002

Something Bush INHERITED, and Clinton BENEFITTED from.

The number of jobs lost and overall economic stress from the housing bubble isn't even comparable to the dot com crash.

Conversely, the housing BOOM didn't over-inflate the job market or economy nearly as much as the dot com boom did.

The rough number on jobs lost in the .com crash was 500k.

Three trillion dollars lost on NASDAQ, 500 failed dotcoms, and half a million hi-tech jobs gone.

http://www.lib.latrobe.edu.au/AHR/archive/...002/lovink.html

[RunInRed 18,317]

From Wikipedia:

The Dot-com bubble crash wiped out $5 trillion in market value of technology companies from March 2000 to October 2002

Something Bush INHERITED, and Clinton BENEFITTED from.

The number of jobs lost and overall economic stress from the housing bubble isn't even comparable to the dot com crash.

Conversely, the housing BOOM didn't over-inflate the job market or economy nearly as much as the dot com boom did.

Time will tell...we haven't seen the bottom yet.

[otterinbham 0]

Clinton inherited 8.0% unemployment. It steadily went down. When it hit 5.2% that meant it had dropped 2.8%. In Dec. of 2000, it was 3.7%, meaning it had dropped 4.3% from when he took office. Unemployment has increased under Bush, it decreased under Clinton. I know you have an inferior education, BG, but this isn't that complicated to understand if you're smarter than a 5th 1st grader.

Clinton's economy also benefitted from an overly inflated internet boom...and we were in a recession during the end of his tenure when the economy was righting itself during the internet bubble.

Bush has had the unemployment rate down as well but he had to inherit the internet bubble, endure 9/11, etc.

For the last 5 years, the dow, jobless rate, and overall economy have been MORE than strong. And all of it founded on real jobs, not some kid raising 2M in VC because he knows how to turn on a computer.

And given those numbers you posted...and considering other numbers past...wouldn't you say that even a 5.2% unemployment rate is a historically very low number...and not cause for all the doomsday coverage?

You can attack my intelligence all you want, but it doesn't make you better than anyone...nor does it make you more informed.

I attacked your education. Not your intelligence.

Upthread you talk about defining recession. We were not in a recession at the end of Clinton's tenure. But I'm not knocking a 5.2% unemployment rate. I'm knocking the constant misplaced comparisons to the rate under Clinton.

Bush's economy has been artificially inflated by a real estate bubble that was created by the subprime mortgage debacle. The impact of this is far worse than the internet bubble.

Plus, Clinton and Bush have taken deficits in opposite directions.

Actually, most economists agree that the recession began in 4Q, 2000. And, even if it began in 1Q 2001, that would have been far too early in Bush's administration to rationally blame his economic policies. http://www.washingtonpost.com/ac2/wp-dyn/A...anguage=printer

Further, I would argue that there is a huge difference between the Internet Bubble and the Real Estate Bubble. As early as 1999 and early 2000 a lot of people were looking at the run up of the stock market and realizing that it was simply unsustainable. When you see P/E Ratios of over 150 (Ten times traditional benchmarks), then the village idiot should have known it was coming.

But the comparison with the Real Estate Bubble is spurious. When Internet stocks tanked, the residual value of most equities was almost nonexistent. However, even if real estate prices drop 25% (which isn't likely), there is still residual asset value, asset value that has increased roughly 100% over the past eight years. In other words, this ain't exactly the Dutch tulip bulb craze.

The other thing that hasn't been discussed here is the secondary crash caused by the lax regulatory environment that took place in the late 90s on Wall Street. Anybody remember Tyco, Enron, WorldCom, Just For Feet, and all those other bit players? These stocks bombed, and dragged the stock market with it, because the SEC wasn't doing it's job in the late 1990s. Today's crash might be because of inflated expectation and optimism, but it sure isn't because of fraud.

Finally, nobody seems to discuss the true immediate cause of both economic slowdowns: The Federal Reserve's regulation of the money supply. The Federal Reserve, rightly, decide to jack up interest rates in 1999 and 2000, sensing an overheated market. The Federal Reserve, rightly, dropped interest rates to the floor in the face of a market collapse. This as we know spurred a huge buildup in the real estate market, chiefly because rates were kept too low too long.

[otterinbham 0]

From Wikipedia:

The Dot-com bubble crash wiped out $5 trillion in market value of technology companies from March 2000 to October 2002

Something Bush INHERITED, and Clinton BENEFITTED from.

The number of jobs lost and overall economic stress from the housing bubble isn't even comparable to the dot com crash.

Conversely, the housing BOOM didn't over-inflate the job market or economy nearly as much as the dot com boom did.

Time will tell...we haven't seen the bottom yet.

Hard to tell, true. But unemployment always trails economic slowdown and subsequent recovery. I think 2Q will be tough, and then we're back up and running. In short, a shallower recession/downturn than the chicken littles forecast.

[TexasTiger 14,273]

But the comparison with the Real Estate Bubble is spurious. When Internet stocks tanked, the residual value of most equities was almost nonexistent. However, even if real estate prices drop 25% (which isn't likely), there is still residual asset value, asset value that has increased roughly 100% over the past eight years.

You miss the point of the comparison. BG says the economy under Clinton was over-inflated due to the dot com bubble. The economy under Bush has been inflated due to the housing bubble:

U.S. household wealth swelled to a new record in the second quarter of 2004, while borrowing outside the financial sector grew at a slower pace, the Federal Reserve said on Thursday. In its quarterly “Flow of Funds” report, the Fed said household balance sheets increased 1.4 percent to $45.907 trillion in the second quarter, compared with an upwardly revised $45.270 trillion in the first quarter of this year. First-quarter household wealth was initially reported at $45.153 trillion, which had been a record high.

Much of the increase in household net worth came from rising real estate values. The Fed said the market value of household real estate, which includes owner-occupied homes, second homes and vacant land, rose 2.9 percent to $15.713 trillion in the second quarter. The value of U.S. stocks were nearly steady at $6.066 trillion in the second quarter, compared to $6.072 trillion in the first quarter. Mutual funds nudged 1.7 percent higher.

http://www.outsidethebeltway.com/archives/...at_record_high/

And the two may be connected:

“Once stocks fell, real estate became the primary outlet for the speculative frenzy that the stock market had unleashed.

http://online.barrons.com/article/SB111905372884363176.html

[BamaGrad03 0]

Again, I think this bears repeating since it's been largely ignored as the comparison to the housing swell keeps coming up:

Three trillion dollars lost on NASDAQ, 500 failed dotcoms, and half a million hi-tech jobs gone.

And it was run up to a cost of an estimated 5 Trillion overall. (3 Trillion was just on the NASDAQ). I had friends graduating in 2000...hell I graduated in 03 and it was just getting back to where IT professionals and grads could even get a job. In 2000, programmers were literally wearing "will code for food" signs.

HALF A MILLION jobs. 500 failed companies. Now, aside from Bush inheriting that...you have to think, conversely, that Clinton benefited from it. He got out just in time to get the label of economic prosperity placed on his tenure.

[TexasTiger 14,273]

Again, I think this bears repeating since it's been largely ignored as the comparison to the housing swell keeps coming up:

Three trillion dollars lost on NASDAQ, 500 failed dotcoms, and half a million hi-tech jobs gone.

And it was run up to a cost of an estimated 5 Trillion overall. (3 Trillion was just on the NASDAQ). I had friends graduating in 2000...hell I graduated in 03 and it was just getting back to where IT professionals and grads could even get a job. In 2000, programmers were literally wearing "will code for food" signs.

HALF A MILLION jobs. 500 failed companies. Now, aside from Bush inheriting that...you have to think, conversely, that Clinton benefited from it. He got out just in time to get the label of economic prosperity placed on his tenure.

Is that all you want? Recognition that some of the prosperity of the 90s was illusory? Okay. No problem. Just recognize that the economy under Bush has had illusory elements as well.

No doubt, the dot com crash hit a segment of the society particularly hard. A segment that had developed some highly unrealistic expectations. I saw it coming and moved all my money in plenty of time. Some folks bet the farm and lost. No reasonable person should have had their whole retirement nest egg in tech stocks then, but some "irrationally exuberant" folks did.

But far more people own homes than actively trade stocks. For most folks, their home is their biggest investment. Over the last several years, Americans have not been saving. Much of their spending has been fueled from equity in their homes.

In a 2007 study by Alan Greenspan and James Kennedy, it was estimated that U.S. consumer spending was increased by nearly 3% due to home equity extractions.

http://www.investopedia.com/articles/pf/07...rime-impact.asp

Many have now lost that equity, but still have the debts. Many owe more on their homes than they are worth.