America's Economic Disconnect

The state of our economy has become a somewhat constructed fantasy created to an extent by mainstream media (MSM) narratives.  Media accounts of economic performance over the past four years have ranged from confusing to inaccurate to flagrant happy talk and spin.  Rationalization and selective reporting of factual information has created economic ‘good’ news and false ‘hopes’ where none existed or should exist.  The techniques employed have included a consistently biased meme, factual omission, factual commission, and even misdirection.  Often narratives have suggested that improvement would occur tomorrow…or next week or next year.  The effect on Americans has been a growing separation between economic reality and the media’s economic illusion. 

  

The ‘measured’ beliefs of many Americans clearly demonstrate that a disconnect does exist.  But are the cited causes the only explanation for this distortion?   Or is the statistical economic snow just too much and too boring for people to digest?  Perhaps Americans lack even a minimal understanding of the somewhat opaque concepts and statistical mechanics of economics.  Or is it because current information is not compared and contrasted to previous months and years with regularity to highlight trends and help understanding?  Or has a ‘new economic normal’ actually taken hold in the minds of most individuals?  These possibilities and others are contributing factors and can be added to the media causes degrading a realistic understanding of our troubled economy.

The public’s disconnect is seen in both polling and measurements of their confidence.   Polling indicates that the American people think the economy has improved since 2009.  In March, Pew Research discovered that 58% believed the economy is recovering or would recover soon verses 40% stating an economic resurgence wouldn’t occur for a long time.  This result compares to their December 2010 poll which surfaced 40% thinking the economy was recovering or would soon improve while 48% felt that economic improvement was in the distant future.  Similar polls by ABC, NBC, Fox News, CNN and CBS largely demonstrate similar results.  Additionally, consumer confidence declined from 68.0 in February to 59.7 in March. Although confidence has been very erratic over time, it has been gradually trending up since 2009.  Neither the polling nor the confidence trend makes sense in the face of the economy’s actual decline since 2009.  

The overall state and direction of the economy can be illustrated by a few important factors. 

• Gross domestic product (GDP) has declined since 2010 when it equaled 2.4% in average quarterly growth (growth greater than 3.0% is considered fair and above 4.0%, good).  GDP in 2011 fell to 2.0% and then sank to only to 1.7% in 2012.  The fourth quarter of 2012 saw an anemic .4% in positive GDP activity.  In sum the cumulative GDP growth for the 12 quarters following the recent recession was 7.2%.  The number translates into the slowest GDP growth rate after a recession in years when compared to 11 previous recessions…where average growth exceeded 15% for a similar 12 quarter period. 

• 4.5 million fewer Americans are working today than when the recession began and amazingly fewer are working today than in 2000.  This is more astonishing when accounting for a labor force increase of 11.4 million since that date.  And the White House prediction in 2009 that with a stimulus plan a 5.2% jobless rate would be realized by now…yet the unemployment rate is 7.6% (U3) and a more accurate measure equals 13.8% (U6) -- per the Bureau of Labor statistics (BLS) unemployment measures.  

• 89,967,000 eligible Americans are currently not in the labor force.  In March 2009, 80,944,000 able bodied workers were sitting on the side lines.  The difference between dates totals 9,770,000 or an increase of 11.0% in the number of individual workers essentially giving up hope of employment.  The number of people leaving the labor pool or simply dropping out causes the unemployment rate to be misleading.  In March 496,000 workers dropped out of the workforce and the unemployment rate (U3) declined to 7.6%...if these workers had chosen to continue searching for jobs the unemployment rate would have grown from 7.7% to 7.9%.  Further if today’s labor participation rate was at January 2009 levels the unemployment rate would equal 10.98%.  Jobs remain critical to a healthy and robust economy.  Yet meaningful job creation simply hasn’t occurred since the recession ended in early 2009.

• Food stamp usage has grown to 47.8 million participants (15% of total population today verses 7.9% from 1970 to 2000), an increase of 70% since 2008.  This support system continues to rapidly expand and preliminary 2013 numbers indicate that the program will soon have 50.0 million users.  The astounding growth is driven by not just the moribund economy and a lack of jobs but a loosening of the standards for inclusion in the program…an increase in a participant’s allowable asset and income thresholds.  Concurrently poverty has grown precipitously to almost 50.0 million, a level not seen since the mid-1960s.  In fact one in six Americans is now in poverty.

• America is in danger of losing 1.7 million of our young workers (18-29 years) to the misery of our economy since they have abandoned their efforts to secure employment.  Many of these people have college degrees and are faced with the reality of much lower wages, older workers staying in their careers longer and only the availability of part time or hourly wage opportunities.

In contrast to the above, doing a careful reading of media economic reports surfaces manipulation and bias.  For example, weekly unemployment assistance filings have not noted that claims have yet to fall below 325,000 during the president’s tenure – a statement based on a sampling of 40 stories by Fox, AP, NYT, Washington Post and Chicago Tribune.  Prior to late 2008 weekly claim counts with magnitudes above 250,000 were considered terrible at best.  Now the narratives basically report the number of new filings, the difference to the prior week’s revised number and the running four week average with virtually no perspective on the magnitude of the numbers, relevance or trends.

The use of adjectives and phrases that do not fit the facts are often found in economic articles.  An egregious but not unusual example by the Associated Press’ economics writer is worth review.  Even the story’s headline, "US economy expands at 0.4 percent rate", is misleading.  In economic terms a .4% increase in GDP is hardly expansion...in fact it is considered economic stagnation.  The opening paragraph says the .4% rate is anemic yet follows that assertion with, “[T]here is hope that growth accelerated in early 2013” without giving a reason for that hope. It’s stated later that, “Analysts think the economy is growing at a rate of around 2.5%”, again without a rationale/support or any identification of the unnamed analysts.  The narrative continues with unsupported positive speculation to its end. 

Another example of the media’s unrealistic and overly optimistic slant is illustrated in a Business & Money story.  The narrative reviews the BLS’s employment release for March 2013.  The writer states that the “Labor Department’s employment situation reports have been generally positive since November of last year” without establishing a standard to measure that judgment.  But later in the 4^th paragraph it is posited that the report is much better than a first glance suggests and in the next segment the reader is told why.  The author uses the increase in employment realized due to a revision in two prior months and adds the amount to the March total of 88,000 new jobs to reach a contrived but still mediocre sum of 146,000 jobs (incidentally the correct math is 149,000 jobs).  And the masking of reality continued… e.g. a stated reason for the massive reduction of 496,000 in the workforce may have been due to unusually high retirement levels (yet BLS employment statistics clearly demonstrate that older people are delaying their retirement).  

Although only a few examples of bias, confusing or manipulative reporting are identified, a critical read of a majority of economic stories in the press will simply emphasize the findings presented.  Given the facts, media bias and manipulation is a valid and important reason -- of many -- for the gap between the public’s perception of the economy and its actual condition.