The media's hysterical depression

Robert Samuelson:

Regarding the economy, it's hard not to notice this stark contrast: The "real economy" of spending, production and jobs -- though weakening -- is hardly in a state of collapse, but much of today's semi-hysterical commentary suggests that it is. Financial markets for stocks and bonds are described as being "in turmoil." People talk about a recession as if it were the second coming of Genghis Khan. Some whisper the dreaded word "depression." Meanwhile, Americans are expected to buy about 15 million vehicles in 2008; though down from 16.5 million in 2006, that's still a lot.

There's a disconnect between what people see around them and what they're told is happening. The first is upsetting (rising gas prices, falling home prices, fewer jobs) but reflects the normal reverses of a $14 trillion economy. The second ("panic," "financial meltdown") suggests the onset of something catastrophic and totally outside the experience of ordinary people. The economy, the New York Times said last week, may be on "the brink of the worst recession in a generation" -- an ominous warning.

Perhaps, but so far the concrete evidence is scant. A recession is a noticeable period of declining output. Since World War II, there have been 10. On average, they've lasted 10 months, involved a peak monthly unemployment rate of 7.6 percent and resulted in a decline in economic output (gross domestic product) of 1.8 percent, reports Mark Zandi of Moody's Economy.com. If the two worst recessions (those of 1981-82 and 1973-75, with peak unemployment of 10.8 percent and 9 percent) are excluded, the average peak jobless rate is about 7 percent.

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Some causes of the present hysteria are familiar: media hype; political finger-pointing, which is always given to exaggeration; and whining from Wall Street types. But there's another large cause: disagreement over whether the economy is highly unstable or whether business cycles are mostly self-correcting.

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The Great Depression doesn't settle the issue. True, massive bank failures converted an ordinary recession into a calamity; but it's also true that government policy -- excessive rigidity by the Federal Reserve -- actually aggravated the banking collapse. Still, economic conditions in the 1930s (average unemployment: 18 percent) were so different from today's that casual references to "depression" amount to fear-mongering. If catastrophe strikes, it will probably result from something we don't now know or haven't yet imagined.

The fact that two pillars of the media, network news and newsprint papers are a shrinking industry probably adds to the hysteria, because many of the reporters see job losses around them and fear they will be next. The NY Times has been depressed for nearly eight years now and sees every tid bit of economic news as a sign of global warming, not a great depression, but you get the idea.