Media Myth: The Recession/Depression of 2006
Good economic news filled 2006 – the Dow topped 12,000 for the first time; 1.36 million jobs were added, along with a Labor Department revision that included another 810,000; average wages increased 4.2 percent and corporate earnings set records. But the three broadcast networks buried that good news beneath bread line images from the Great Depression or warnings about a possible recession.
ABC, CBS and NBC referenced the Great Depression or suggested that recession was on the horizon a total of 49 times in 2006. Depression and recession were also mentioned in a historical context 28 more times. That wasn’t all:
Good Economy or Great Depression?: Journalists used stories as diverse as savings rates and climate change to evoke images from America’s worst economic catastrophe.
Or Maybe It’s a Recession? Network reports included warnings about interest rates, high oil prices, global warming, a slowing housing market, and terrorism that all could lead to a recession.
Consistently Negative: The networks averaged almost one story per week that included references to an economic collapse either by recession or depression (49 times).
By Julia A. Seymour
Dustbowl images of farmers battling for their homes or somber men waiting their turn in soup lines filled the TV screen. But the year was 2006, and economic reality was bright.
Broadcasters warned of everything from a recession caused by the “housing bubble” or even a global economic collapse similar to the Great Depression, on average almost once a week in 2006.
One CBS story underscored the danger of a new recession or depression with newspaper headlines from the 1929 stock market crash or the 2000 dotcom collapse. Viewers were reminded of dark days: “Wall St. Lays An Egg” and “Dotcom.failures.”
In addition to drawing comparisons between the current economy and the worst economic crisis in American history, reports also warned about recession more than 30 times. This was despite job growth, a new stock market high, record corporate earnings and increases in real wages.
“With big business struggling, unsteady interest rates and signs of a recession, the best some forecasters are hoping for in 2006 is an average year,” said reporter Sharyn Alfonsi to kick off the New Year’s stock market predictions during CBS “Evening News” on Jan. 1, 2006.
CBS came full circle, finishing off the year with another report by Anthony Mason on Dec. 14, 2006, that included an economist again warning of a recession if consumer spending wasn’t strong enough.
An analysis of all ABC, CBS and NBC reports for 2006 found 77 stories that mentioned an economic recession or depression. Of those, 49 of the stories were about the 2006 economy. The media predicted a 2006 recession, and when that didn’t happen they predicted a 2007 recession. Reports warned of recession or depression caused by a litany of factors: “high oil prices,” climate change, the cooling of “a once scorching housing market,” a terrorist act or interest rate hikes.
The difference between the actual economy and perception of a recession was explained by Mary Matalin, a former assistant to the president, in an April 20, 2006, interview. “There is a disconnect between what is a robust economy, and people saying they’re better off today than they were four years ago but thinking we’re in a recession,” said Matalin during “The Early Show” on CBS.
A Penny Spent …
More than one-third of the depression and recession stories (17 of the 49 reports) drew actual comparisons to the Great Depression or warned of an economic collapse of that size.
NBC “Nightly News” anchor Brian Williams warned of “ominous news” in a Jan. 30, 2006, story. “The Commerce Department reports that American’s personal savings was negative last year, clocking in at minus .5 percent,” he explained. “The last time the national savings rate was this low was 1933, just after the bottom of the Great Depression.”
But 2006 looked nothing like 1933. “It was the worst slump in history, and the most protracted,” wrote Paul Johnson in the introduction of Murray N. Rothbard’s book America’s Great Depression. “At one point 34 million men, women, and children were without any income at all,” Johnson continued.
Though the savings rate may be similar now, even CBS explained why Americans’ savings were what they were in 2006. Standard & Poor’s chief economist, David Wyss, said in a CBS report, “It’s the rise in the value of the stocks. The rise in the value of your house. And, you know, those have been going up nicely enough that most people don’t see why they have to save any more on top of that.”
Still, the media continued to use the savings comparison in February, March, April, July, August and November reports. But then in December, CBS warned of a possible recession if spending slowed.
A report by Anthony Mason about lower consumer spending during the CBS “Early Show” on Dec. 14, 2006, included downbeat comments from University of Maryland economist Peter Morici. He said if consumers were too concerned about other economic factors like housing and “turned the spigot off on spending all at once, we would slide into a recession quite easily.”
Reports on declining housing prices also made the buyer’s market sound like a bad thing for the economy – throwing in Great Depression references though average home prices had increased by a whopping 52.3 percent between 2001 and 2005.
On the Nov. 1, 2006, “Evening News,” CBS’s Anthony Mason included a bleak statement by Mark Zandi of Economy.com. Of the decline in housing prices, Zandi said, “It’s unprecedented. You’d have to go back all the way to the Great Depression to find a year in which house prices declined.”
But according to Walter Molony of the National Association of Realtors, 2006 was not a year in decline. The organization projects that the average median home price for 2006 was $222,100, a little more than one percent higher than the 2005 median home price. But the temporary decline in prices during 2006 – coming off record highs in the housing market – certainly did not equate with homelessness, starvation or economic despair.
In addition to that negative coverage, two reports raised the threat of an economic collapse as devastating at the Great Depression. A report by CBS’s Bill Phillips on Oct. 30, 2006, offered a “dire prediction from the British government” about how global warming would affect world economies.
Nothing to Fear But the Fed, and Everything Else
News reporters, anchors and experts found fears of possible recession in many places, including news of high gas prices or that the Federal Reserve might raise interest rates and send the economy into a tailspin.
After a two-day stock tumble of 245 points in early June, mistrust of the Fed surfaced. “The stock market is worried that the Federal Reserve may go too far. They may hike interest rates too many times and therefore send the economy into a recession,” said Alan Skrainka, chief strategist for Edward Jones investment firm during ABC’s “Good Morning America” on June 7, 2006.
But just two months later on August 8, ABC’s Terry Moran wanted to know why the Fed had stopped raising rates. “Why stop now?” he asked on “World News with Charles Gibson.
Gas prices also sparked fear on CBS’s “Early Show.” “[H]ow long can we be used to prices this high before it sort of slips the United States into recession?” asked Tom Kloza, publisher of the Oil Price Information Service, on Feb. 3, 2006. Just one day earlier the national average for a gallon of gasoline was $2.355 according to AAA, almost 70 cents lower than the 2006 high of $3.036 on Aug. 10.
Then there was the housing market once again. In an Oct. 3, 2006, “Evening News” story about the record-high Dow Industrial average, CBS’s Anthony Mason found time to talk recession. After quoting a “California retiree” who didn’t trust that the stock market would continue its rally, Mason said, “She’s not alone. With existing home prices falling for the first time in more than a decade and a new study showing homeowners spending more and more of their incomes on housing costs, some Wall Street analysts see another bubble in the economy.”
Mason referred to the 2000 stock market bubble and post-9/11 recession and cautioned about dangers of “another bubble” in housing. Only a few weeks after Mason’s report, the Dow went to a record-high close of 12,000.
If at First You’re Wrong, Try, Try Again
When media predictions were wrong about the Fed, housing, and oil prices prompting a recession, reporters simply moved recession worries to stories for 2007.
“I would say right now the brilliant minds are saying soft landing, but there is a significant minority out there who say we have a 30-percent-plus chance of a recession,” said CNBC’s Erin Burnett during the “Today” show on NBC Sept. 4, 2006.
During a Dec. 14, 2006, report, “The Early Show” on CBS included an economist predicting a 2007 recession if shoppers didn’t keep spending.
But according to an AFP story from Jan. 14, 2007, in hindsight the 2006 economy was looking better, and economists had upgraded the forecast “after surprisingly strong data.” The article cited Lehman Brothers chief U.S. economist Ethan Harris: “After slowing in November, the economy seems to have regained its stride.”
The article also stated that unemployment was holding at 4.5 percent, average wages were up 4.2 percent for 2006, and even retail sales were strong, increasing 0.9 percent in the month of December.
Despite the network emphasis on depression and recession, there was a little optimism to be found. CBS’s Anthony Mason remarked that the U.S. was in a Goldilocks economy “Not too hot, not too cold, but just right,” on May 5, 2006 “Evening News.”
But out of the 49 stories, only one stated that recession fears “have now given way to optimism.” That was ABC reporter Betsy Stark’s assessment on Oct. 3, 2006, during “World News.”