Are economists out of touch? By definition, I’m afraid so. Take a 60 Minutes feature two years ago where Alan Greenspan can be seen enjoying reading labor and manufacturing statistics over breakfast, while his wife, Andrea Mitchell, looks on, swooning over how adorable she thinks it is.
I’m not sure it’s their fault though. It’s just their nature, and someone’s going to follow this stuff. The disconnect arises when economists irritate laypeople with statements like these: “The recession is very likely over at this point.” That was Federal Reserve Chairman Ben Bernanke speaking Tuesday at the Brookings Institution.
Okay, so I did extract his quote out of its natural habitat (and unlike other media entities I am admitting to it), but the gist is still the same: “Even though from a technical perspective the recession is very likely over at this point, it’s still going to feel like a very weak economy for some time as many people will still find that their job security and their employment status is not what they wish it was.” This technical analysis may be accurate, but it does little to help the national mood.
Bernanke’s not the first economist to put bookends on the recession, but he is the best known. These economists called the recession in May in Forbes. Some outlets have been teasing the story for a few months now. And the IMF’s top dog said a month ago that the global recession is over and the recovery has begun. The consensus is that America was the caboose entering this tunnel, but still, as interdependent as today’s world is, can that really be so? And what’s the benefit in saying it?
A huge portion of the population is still reeling from the fall and struggling to get up. It’s not like four years after Katrina the new head of FEMA would be so insensitive as to call a press conference to say, “We’re all back to normal!” Can you imagine what Tyler Durden would do to him?
A fundamental problem with economic measurements is that they are behind the pitch. The National Bureau of Economic Research is the authority on this, and they can be seen diligently sifting through economic data while the rest of us are feeling them. By the time the bad ones are available, it’s too late, and by the time the good ones are available, everyone’s moved on.
This recession is a perfect example. Politicians, columnists, and news writers were talking about how we were in a recession for months and months before it got the NBER stamp of approval: “the latest recession began 12 months before it was officially declared in December 2008.” Talk about lag time.
If a narrowly relevant definition of recession is proven to have ended this summer, does it matter? It seems like a lot of people don’t think so…
Uber-curmudgeon he may be, CNN’s Jack Cafferty references that 87% of Americans still believe we are in a recession according to a CNN/Opinion Research Corporation poll early this month. A large swath of his commenters agree.
Emily Bazelon’s been keeping her hand on the pulse of Slate readers, who tend to slant towards the affluent and educated, and even most of them aren’t feeling that this thing is over.
What it boils down to is something I don’t think I realized until a few years ago whilst in the throes of corporate work: economics is in large part psychology. Markets and prices are affected by impression, mood, and behavior. Above all, perception is reality, or usually becomes it.
The most important indicator for people’s lives is not GDP or even the Dow, despite the ties most of us have to a 401k or a brokerage account. It’s the unemployment rate, because the vast majority of Americans’ income does not emanate from ETF percentage gains and high-yielding dividend stocks; it comes from wages and salaries.
Even if it feels like the worst is over, that doesn’t mean we are through the Gauntlet yet. And even if we were, wouldn’t we still be awaiting the Eliminator?
Thus, these claims on start and end feel like detached academic arguments. Does the responsibility lie with the economist for making these statements, or just for making them in such formal public settings? Or with media outlets for craving these stories and omitting context?
Don’t get me wrong, I’m quite taken with the handsome glare shimmering off “Booyah!” Bernanke’s balding head in that Wall Street Journal portrait. He looks rather dignified. And I’m glad that August was a huge month for retail sales (hooray clunkers!) So, despite this misstep, I’m happy he’s being renewed for a second term. I just haven’t quite worked out what’s the best diet of economic data for mass media consumption.