The Commerce Department released the fourth-quarter Gross Domestic Product (GDP) January 27, and the 1.1 percent growth was well below what the 2.8 percent analysts had predicted. Though the stock market rose by 98 points and the dollar rallied strongly against most other currencies, much of the news was strongly negative. Articles over the weekend had phrases like The economy slowed to a near crawl in the final quarter of 2005, a listless showing that was the worst in three years, and Those numbers suggested that the economy is slowing and an end is in sight to free spending.
One of the most bearish reports came from that evenings NBC Nightly News. Reporter Anne Thompson began her segment in a similar vein: The economy went into a surprising downshift at the end of 2005 as consumers put the brakes on spending and the rate of growth. Among the reasons for the slowdown, Americans bought fewer automobiles. After a video clip of an economist linking slower car sales to rising gas prices, Thompson used the bulk of her report to focus on escalating energy costs, while tying it to Chevrons strong earnings announcement.
Thompson then used a couple experiencing financial difficulties to depict a poor economy despite the reality of a 4.9 percent unemployment rate and 10 straight 3-percent-plus quarterly increases in GDP. Energy prices are still straining Allen and Caroline Millets budget, she said. According to Thompson: Hes spending $40 more a week to fill his truck than a year ago, and their home heating bill has more than doubled. So theyre conserving, lowering the thermostat, selling one of their cars and not going out as much. This claim of a doubled home heating bill was fascinating given the 44 percent decline in natural gas prices the past seven weeks due to the warm weather.
But the bit about their gas costs was worth more attention. Gas prices are up about $0.46 from this time last year, according to AAAs Fuelgaugereport.com. If Millet is spending $40 more per week on gas, this means hes buying 87 gallons a week and spending more than $800 per month on gas.
The Energy Information Administration, shows that is more than five times as much as the $150 per month a typical American family spends on gasoline. No wonder they were having financial problems.
Regardless, Mrs. Millet said, Its not taking food out of my mouth, but its eliminating things that we like to do together. Thompson still suggested a culprit: Meanwhile today, more eye-popping oil company profits as Chevron reported making a record $4.14 billion last quarter, a 20 percent increase. Maybe she should have urged the Millets to get a more fuel-efficient truck.
Almost as gloomy was the January 29 New York Times article entitled U.S. Economy Grows at Slowest Pace in Three Years. It began: Economic growth weakened unexpectedly in the fourth quarter of 2005, rising by 1.1 percent, the slowest pace in three years, the government reported today, clouding the immediate outlook for the economy. The article said the result surprised many forecasters and pessimistically concluded: Charles Dumas, the chief international economist at forecasting firm Lombard Research in London, said in a note to investors: It will take a miracle as fine as Mozart, 250 years old today and as fresh as new, to prevent a sharp U.S. slowdown in the second half of 2006, probably to nil growth by the fourth quarter.
The Washington Posts Nell Henderson was equally downbeat in her article of the same day. The recent retrenchment by consumers also reflected several stresses that may weigh on the economy in the months ahead, others said, pointing to record levels of household debt, low savings and weak wage growth at a time of rising interest rates and a cooling housing market, she wrote.
The cooling housing market statement was curious as Henderson neglected to tell her readers that the Commerce Department also announced that new home sales unexpectedly rose by 2.9 percent in December, setting a new one-year record that surpassed 2004s total by a full 6.6 percent.
Strong GDP Downplayed
Media coverage of economic growth was, at best, inconsistent. NBC, The New York Times and The Washington Post all gave more coverage to downturns in the GDP than the strong reports.
When the third quarter GDP numbers were released on October 28, 2005, showing a stronger than expected 3.8 percent increase, Brian Williams of the NBC Nightly News gave it a minor mention. On Wall Street today, stocks finished sharply higher after a report showed economic growth was unexpectedly strong, a GDP of 3.8 percent in the third quarter despite Hurricanes Katrina and Rita, said Williams. Thats all. No lengthy segment showing an average couple benefiting from a stronger economy.
Of course, this was more than what NBC reported when the GDP grew by an expected 3.4 percent in the second quarter. The Nightly News ignored that report.
Yet, when the first-quarter numbers came in worse than expected on April 28, 2005, the Nightly News was all over it. That evening, Brian Williams said the U.S. economy hit a pothole at the beginning of this year. He continued his negative report, saying, The broadest measure of the nations economic health, the Gross Domestic Product rose at an annual rate of 3.1 percent in the first quarter, down from a 3.8 percent pace in the prior quarter. It is the worst reading in two years.
The New York Times was also guilty of differing coverage of the GDP depending upon whether the news was good or bad. For example, the January 28, 2006, article on the bad news of fourth-quarter growth was placed on the front page of the business section. By contrast, the Times October 29, 2005, article about strong third-quarter growth, which was better than expectations, was on page 2.
In addition, the good news in the October report was downplayed by qualifying the data. The first estimate of quarterly GDP is based on incomplete data and it is revised as more information is collected; the government will release a more comprehensive estimate on Nov. 30, stated the piece. The Times January 28, 2006, article didnt use such a qualifier when the first estimate was much worse than expected.
When the news was bad in April, 2005, the Times article concerning first-quarter GDP was back on the front page of the business section. Nowhere in this article was any qualifier concerning this being a preliminary report that will be revised as more information is collected similar to what was reported in October when the news was better than expected.
This is especially important since the final revisions for the first quarter ended up showing 3.8 percent growth, greater than the initial expectations of 3.6 percent, and greater than the first estimate of 3.1 percent.
The Washington Post also downplayed strong reports while hyping the bad ones. When the third-quarter GDP was stronger than the 3.6 percent analysts had expected, Post reporter Nell Hendersons October 29 article didnt mention it. Rather than focus on the surprising strength of this report, Henderson accentuated the negatives. Economic activity has cooled since the summer, analysts said. Auto sales have fallen after booming in July. Hiring was robust in July and August, but thousands of jobs were lost in September because of the hurricanes, she explained.
Henderson also qualified these numbers with That first estimate of GDP growth could be revised in coming months, something she didnt include in her January 28, 2006 bad news piece. Henderson didnt qualify the disappointing first quarter GDP numbers with this first estimate statement either.
Hendersons most artful downplaying came on July 30, 2005. In a report that could have focused attention on second-quarter GDP growth matching analyst expectations, Henderson instead began with concerns about workers pay and benefits and followed with other concerns. Meanwhile, rising energy costs helped push consumer prices up at an annual 3.3 percent rate in the second quarter, while the economy grew at a 3.4 percent annual rate, the Commerce Department said in a separate report, she wrote.
Henderson further downplayed second-quarter GDP by quoting Jared Bernstein, a senior economist from the liberal Economic Policy Institute: "The economys doing fine, except if you figure in working families."
Noel Sheppard is an economist, business owner, and contributing writer to the Business & Media Institute. He is also contributing editor for the Media Research Centers NewsBusters.org. Noel welcomes feedback at email@example.com.