Someone made the famous quip that economists have predicted nine of the last five recessions. The track record of America’s news media is even more dismal. Our nation has just passed through the most spectacular quarter-century of economic growth and overall prosperity in human history. Yet it’s been hard to pick up a newspaper at any time during that run without reading of some cloud in the silver lining. Now that there are genuine signs of economic distress, the media’s gloom has ratcheted into something close to hysteria.
This was written a day after headlines blared alarms about the latest preliminary GDP data showing the U.S. economy grew a miniscule 0.6% in last year’s fourth quarter. Not exactly great news, but hey, it’s not a decline. One could even be encouraged by the fact that we achieved a bit of growth despite incessant reporting about the housing slump, credit crunch, drooping dollar and the travails of Britney Spears. That last item has nothing to do with economics, but it relates as another depressing story beaten to death by the news media.
Of course the media needs to report bad news, but balance and perspective are way out of whack. Bad news gets far more play than good news, and perspective is distorted by a barrage of worst-case scenarios.
Political demagoguery from the left in this election year lends fortissimo to the media’s dirge. Never mind that unemployment and inflation rates are miniscule by historical standards. Never mind that the vast majority of Americans are living better than ever before, and that no country offers as much opportunity to climb out of poverty. No amount of economic sunshine can penetrate the leftist gloom over the fact that some people stubbornly live better than others.
I’m no pie-eyed optimist. You’d have to be smoking something illegal not to notice troubles in our economy. Distributors whose fortunes are tied perhaps too much to new housing are suffering double-digit sales declines. It’s just that unrelenting negativity can become a self-fulfilling prophecy by persuading consumers and businesses to tighten their belts unnecessarily. Speaking at the NAW Executive Summit in late January, economist Alan Beaulieu quipped, “If you love your country, go out and spend some money.”
I don’t pretend to be an economic forecaster, but I read a lot of them and find predictions all over the spectrum. The naysayers may well be correct in foreseeing a steep downturn, but let’s make them earn their keep and not talk our way into their recession. Other forecasters say the worst is behind us, and they are just as likely to be right.
One reason to take heart is that some kind of structural shift seems to have taken place within the American economy that makes recessions rarer and less severe than they used to be. The last really bad recession occurred in 1981-82, when the bill for whipping double-digit inflation was a 1.9% contraction in GDP. Even that paled in comparison to downturns that occurred in the first half of the 20th century.
Recessions used to occur regularly at about four- to five-year intervals. The record shows our country was in recession some 22% of the time in the postwar era from 1945 through 1982. In the next 25 years, we have suffered only one bona fide recession - defined as at least two consecutive quarters of negative economic growth. That was a relatively mild contraction spanning 1992-93. Since then we’ve had only five non-consecutive quarters when GDP suffered rather tiny declines, the most notable being the fourth quarter of 2001 in the aftermath of 9/11.
Remember all the media babble back then of how the downing of the Twin Towers might precipitate an economic collapse rivaling the Great Depression? Instead, by the beginning of 2002 things started to turn around and set the stage for one of the biggest construction booms in U.S. history. That was the acid test of U.S. economic resilience and we passed with flying colors.
You can find gloom and doom scenarios everywhere, but for the sake of balance be sure to read this month’s cover story penned by a couple of smart fellows from BRG Consult, a market intelligence firm whose client list reads like a Who’s Who of the global plumbing industry. Theirs is the most optimistic forecast we’ve seen. They may or may not prove right, but their promising assessment comes as a sweet melody amid the screeching chorus of pessimism.
To all those choirs, we say, oh, shut up and let things happen as they may.