No matter how the economy is doing, the word 'recession' never seems too far away. CBS began the year with talk of a recession and similar discussion has cropped on up ABC and CNN throughout 2006 and even going back to Hurricane Rita last fall.
ABC delivered two separate warnings of the latest recession fears on June 7. Starting with 'Good Morning America,' the network ran counter to recent news that first-quarter growth had been revised upward. The new number was even stronger: 5.3 percent. Despite that excellent performance, reporter Robin Roberts warned that a recession was possible. 'The two-day sell off was sparked by concerns that the Federal Reserve could raise interest rates too much, cooling the economy to the point of recession,' she claimed.
Later that same day, ABC correspondent Betsy Stark gave the 'World News Tonight' audience another dose of bad medicine by again talking about a possible 'recession.' Stark also warned that the Federal Reserve could cause a recession if it were to "raise interest rates too much to fight inflation."
Neither report included any experts who could point out the current strength of the economy.
The very same day, The Washington Post showed what ABC viewers were missing by quoting Al Goldman, chief equity strategist for brokerage firm A.G. Edwards & Sons Inc. “There's some panic in the street,” Goldman said, “but I don't feel it's justified. … We don't have any signs that a recession is at hand, and inflation, although it's up, is still pretty well contained.”
Reporter Sharyn Alfonsi painted a far worse economic picture for 2006 on the New Year’s Day edition of the “CBS Evening News.” Introducing her report, Alfonsi began with an anecdote about the stock market fluctuating. Alfonsi then ominously warned, “that’s about the only guarantee this year. With big business struggling, unsteady interest rates, and signs of a recession, the best some forecasters are hoping for in 2006 is an average year.”
CNN’s Carrie Lee suggested that Hurricane Rita foreshadowed a recession during her Sept. 23, 2005, “Daybreak” report. “Think about this,” Lee said. “The last four recessions we’ve seen in this country have been preceded by very high oil prices. Well, this time around all of these refineries shut down in the Gulf of Mexico, causing some people to worry about rising costs for gasoline, $5 a gallon.”
Expert Choices to Promote a Downturn
Finding experts who promote the idea of a recession takes effort, but somehow TV networks manage. Both The Wall Street Journal and Reuters said the dozens of experts they spoke with predicted 2006 would show continued solid growth for the U.S. economy – not a recession.
“The consensus forecast of 56 economists surveyed by The Wall Street Journal is that the nation’s Gross Domestic Product – the broadest measure of economic output – will grow at an annual rate of 3.5% in the first half of 2006 and 3.1% in the second half,” reported Rafael Gerena-Morales and Tim Annett in the January 3 paper. On December 30, Reuters correspondent Natalie Harrison noted GDP growth for the United States was estimated at “3.6 percent this year and 3.4 percent in 2006.” Reuters interviewed 100 economists.
The networks haven’t looked at the issue as realistically. On May 1, CNN’s Soledad O’Brien used energy worries to raise concerns about a possible recession. In an “American Morning” segment, O’Brien explained that “the U.S. Energy secretary confirms what many people probably already were thinking, we’re in the middle of an energy crisis.” She quickly followed with the typical question: “Could a recession follow?”
She brought in oil industry analyst Peter Beutel who made a case that higher oil prices would lead to a recession. Beutel, president of Cameron Hanover Energy Risk Management Firm and author of "Surviving Energy Crises," complained that “we’re taking billions of dollars out of the U.S. economy.” But Beutel just last year predicted that the oil price “bubble” could “burst at some point in the future” in a Sept. 26, 2005 CNN.com article.
Beutel has been a consistent guest for CNN with a consistent theme, predicting a recession in several CNN appearances. On the April 16 “In The Money,” he made a similar prediction. Of course, long-time viewers of CNN can go back further than that. On June 29, 2005, Beutel declared: “Oil, I think, is on a collision course with the economy, and eventually this is going to cause a recession.” On June 16, 2001, Beutel was again saying that oil prices can lead to either inflation or recession, though at that time he was hedging more toward inflation.
Beutel has been on CNN at least four times in 2006. By contrast, BP CEO Lord Browne has only been on once and that was to discuss alternative energy. When Browne predicted a huge drop in oil prices in a June 11 interview with Germany’s Der Spiegel magazine, he was totally ignored by that network, as well as by all three broadcast networks.
The Associated Press wire service did write about it on June 12, reporting that Browne “said in an interview with Germany weekly Der Spiegel that oil prices could drop to about $40 a barrel in the medium term as new supplies are found, and might fall even further in the long term.”
CNN wasn’t the only network to highlight experts who cried recession. The March 7 broadcast of “Nightline” interviewed security consultant Steven Flynn who warned that terrorism was a major economic threat. “If a bomb went off in a sea port, we would likely see a closing of our sea ports. Bringing the global trade system to a halt. And essentially putting out economy into a recession.”
Tom Kloza, of the Oil Price Information Service, barely got any response when he mentioned oil prices leading to a recession on CBS’s February 3 “Early Show.” “But you know, the question is how long can we be used to prices this high before it sort of slips the United States into recession,” Kloza asked. Rather than respond with information about the strength of the rest of the economy, co-host Harry Smith simply answered “Into recession, yeah.” Before following up with a gas price question.
The Good News That Gets Ignored
The key problem with news reports of a possible recession is they often lack information on how well the economy is already doing. “As we look around the global economy today, we see no major crises, no major economies in recession. We see strong growth, inflation well-contained, interest rates at the low end of the historic level and rising prosperity,” U.S. Treasury Secretary John Snow said in a June 11 Associated Press report.
While Snow’s quote didn’t mention the United States, the actual numbers tell a positive economic story. That good news includes:
Strong growth: GDP growth was already at a strong 4.8 percent for the first quarter and it was revised upward to 5.3 percent.
New Jobs: Roughly 1.9 million jobs have been added in the last 12 months, part of a trend of positive job growth lasting 33 months long.
Unemployment: Unemployment is now just 4.6 percent, lower than the average of the last four decades.
Even if reporters stop keep talking about a possible downturn, the economy will remain in the news. In a June 12 New York Times interview, James Paulsen, chief investment strategist at Wells Capital Management, had some useful guidance about the economy. Paulsen urged caution about overreacting each time the market dropped a little. “Every time it swoons doesn't mean we have a recession coming.”
Staff writer Ken Shepherd contributed to this account.