By
Noel Sheppard
May 3, 2006 - 2:00pm
Despite the negative media coverage, the economic news was striking. As reported by Bloomberg [2]: The U.S. economy expanded in the first quarter at an annual pace of 4.8 percent, the fastest in more than two years, led by resurgent consumer spending and the biggest jump in business investment since 2000. Coming after the disappointment of hurricane-impacted low growth at the end of 2005, this should have been welcome news.
Unfortunately, the media didnt see it that way. The worst offender was CBS, which chose not to report the GDP announcement at all on its April 28 Evening News program, even though Hannah Storm had warned on the Early Show that day that soaring energy costs [are] threatening economic growth. But CBS didnt share with its viewers that in the first quarter this clearly wasnt the case.
Instead, the Evening News did reports on how Iranians are buying gold on Tehrans version of a commodities exchange, a Spanish version of The Star Spangled Banner, a sixth-grader with Cystic Fibrosis who helped keep a school open in Philadelphia, and Limbaughs settlement in his Florida drug case.
CBS apparently considered all of those issues more important to its viewers than economic news. Yet, this wasnt the case on January 27 when the news wasnt so good. During an interview with President George W. Bush on the Evening News, Bob Schieffer specifically addressed the slower-than-expected fourth-quarter numbers that came out that morning: A report came out today that shows there was a sharp slowdown at the end of last year as consumers facing high energy prices cut back on their spending. The numbers show the GDP was growing in the fourth quarter at an annual rate of just 1.1 percent.
Gas Prices, Rush and Inflation, Oh My!
But in the present, good economic news wasnt even as important as the legal issues of a conservative talk show host. ABC literally postponed its discussion of the strong economic news on World News Tonight April 28, as Elizabeth Vargas began the show: Good evening. We'll get to news about the economy in just a moment, but we begin this evening with breaking news from south Florida.
When the network moved into a GDP discussion, a large pail of cold water was thrown on the data. Reporter Betsy Stark ended the segment with a flood of negatives: The economy overall remains healthy, but the outlook has become clouded by rising interest rates, a slowdown in housing, and of course, rising gas prices. Most economists are forecasting slower growth for the rest of the year.
From there, Vargas moved the discussion to oil, and how rising energy prices could derail the current economic expansion: As you mentioned, rising gas and oil prices perhaps the biggest risk to the economy. Correspondent David Herley then enumerated all of the various products that could see higher prices in the months ahead due to rising fuel costs, including tires, airfares, diapers, carpets and crayons.
Yet none of those reports told viewers that inflation was lower in the first quarter than in the fourth quarter, even as gasoline prices increased by almost 40 cents per gallon an 18-percent jump.
Again, Bloomberg cut through the rhetoric: The government's personal consumption expenditures index, a measure of prices tied to consumer spending, rose 2.0 percent after a 2.9 percent rise in the fourth quarter. The index excluding food and energy, a measure favored by Fed policy makers, rose at a 2.0 percent annual rate after a 2.4 percent rise the previous quarter.
Another measure of inflation in this GDP report also showed a decline: The GDP price index, a measure of prices tied to the report rose at a 3.3 percent annual rate in the first quarter, following a 3.5 percent fourth-quarter gain.
The NBC Nightly News took a different strategy to downplay the significance of the strong economic report. Anchor Brian Williams optimistically began: While Americans are struggling with the price of gasoline, some astounding numbers came out today on the strength of this U.S. economy. The GDP, the output of goods and services, grew at its best rate in two and a half years.
But reporter David Gregory quickly dismissed the announcements significance: The president appeared in the Rose Garden today to talk up strong economic growth, 4.8 percent in the first quarter. But with gas prices also surging, he realized the country isn't celebrating. And thats all the time the Nightly News devoted to the strongest GDP report in two and a half years.
Instead, Gregory addressed big oil companies under fire, calls to abolish FEMA, the ongoing conflict with Iran, a Spanish version of The Star Spangled Banner, and massive immigration rallies across the country on Monday.
Three months earlier, when the fourth-quarter GDP came in weaker than expected, the Nightly News spent a great deal of time addressing the disappointing data. Williams began that segment:
Now to the U.S. economy and word today that business was slow in the last part of last year. It turns out the gross domestic product for the last three months of 2005 came in at just 1.1 percent. That's much lower than economists had been expecting. Is this just a monetary momentary hiccup or a sign of a real slowdown?
Sure, Its Great Now, But
The print media were no different. The New York Times chose to downplay the wonderful economic news by first burying its April 29 GDP article [3]on the third page of the business section. By contrast, three months earlier when the fourth-quarter numbers were disappointing, that news received prominent placement on the cover of the business section.
After optimistically reporting the good news in the lead paragraph, reporters Eduardo Porter and Vikas Bajaj quickly downshifted into gloomy gear in paragraph two: But the roaring American economy may be turning quieter. Even as the government report portrayed an economic engine firing on all cylinders, most economists argue that growth is poised to settle into a more moderate pace, slowed by high energy prices, rising interest rates and a softer housing market.
Bajaj and Porter conveniently found a bearish economist to quote: This is the last big GDP number we are going to get in this economic cycle, said Ian Shepherdson, chief United States economist at High Frequency Economics in Valhalla, N.Y. We are headed toward a slowing path.
They bolstered their case for a slowing economy by referencing a consumer confidence survey released on April 28: A majority of households now expect an economic downturn and bad financial times by the end of this year, said Richard Curtin, the director of the University of Michigan's Surveys of Consumers.
The reporters chose not to share a more upbeat consumer confidence survey released just three days earlier by the Conference Board. As reported [4] by United Press International: U.S. consumer confidence rose in April to its highest level since May 2002, an industry group said Tuesday. The article cited the opinion of a Conference Board director: Improving present-day conditions continue to boost consumers spirits, said Lynn Franco, director of The Conference Board Consumer Research Center.
Bajaj and Porter also added fears of an imploding real estate bubble into the mix: A weaker housing market is expected to weigh on the economy in two ways. Like consumer confidence, the authors chose not to share a Commerce Department report on April 26 stating, as reported [5] by Reuters: Sales of new U.S. homes rose a much larger-than-expected 13.8 percent in March to a 1.213 million unit annual rate, the biggest one-month gain since April 1993.
The Times article also ignored an existing-home sales report on April 25 that came in stronger than expected, according to Reuters [6]: The pace of existing home sales in the United States picked up by 0.3 percent in March, defying expectations for a slowdown, due to increased buying in some less expensive markets and in part to warm weather, a trade group said Tuesday.
Washington Post reporters Fred Barbash and Bill Brubaker delivered their own downbeat GDP article [7]in April 29s business section. It downplayed good economic news by prominently displaying the opinions of a highly partisan politician: House Democratic Leader Nancy Pelosi of California called the report cold comfort to working Americans faced with the reality of struggling to pay their bills.
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 nsheppard@costlogic.com [8].