Spinning the economy
lnp3 at panix.com
Thu Dec 6 08:47:10 MST 2001
Newsweek, December 6, 2001
Dec. 5 - The American economy has officially entered what promises to be
the worst recession since the early 1980s and, conceivably, the worst since
World War II. But you'd hardly know from the media, which have treated the
economic story as a sideshow. To take one example: When the National Bureau
of Economic Research - the academic group that designates business cycles -
declared the recession last week, the New York Times didn't even put the
story on Page 1. The indifference stems mainly from the obsession with
terrorism and a belief (shared by many economists) that the slump will be
brief and mild. But there's also another cause: Wall Street.
ON THE ECONOMIC STORY, editors have subconsciously delegated their jobs to
Wall Street. "NBER Sees Recession; the Markets See Recovery," is the title
of a recent report by stock strategist Peter Canelo of Morgan Stanley.
Editors have adopted that view. Since Sept. 11, major stock indexes have
recovered smartly. As of yesterday, the Dow Jones Industrial Average was up
20 percent from its post-Sept. 11 low and was 3 percent above its close on
Sept. 10. The story is similar for the Standard & Poor's 500. Having
contributed to the last decade's stock mania, the media remain-at
heart-believers. If the market signals recovery, it must be.
Maybe not. The stock market's record as a "leading indicator" is spotty.
Meanwhile, the "real" economy of jobs and production counsels caution.
Europe, Japan and the United States are all in slumps. In October, Japan's
industrial production was off almost 12 percent from a year ago and was at
its lowest level since 1988. Europe's gross domestic product advanced at a
meager rate of 0.2 percent in the third quarter. As for the United States,
here's a sample of recent bleak reports:
--The Conference Board's index of help-wanted ads dropped in October to its
lowest point in 37 years.
--Continuing claims for unemployment insurance rose to 4.02 million, the
highest level in 19 years.
--The decline in third-quarter GDP was revised to 1.1 percent (at annual
rate) from 0.4 percent.
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