Richard Stock was among several economists polled Friday by the Dayton Daily News who blamed the news media for fanning consumers’ fears and opening the door to the possibility of another recession.
“There is nothing in the objective evidence on the economy that would suggest a double dip, but it’s certainly the case that you can talk us into one,” said Stock, director of the University of Dayton Business Research Group. “It’s a situation where a media frenzy does start to create the conditions that would make a recession more likely.”
He noted that consumer spending accounts for about 70 percent of all economic activity, and consumers have been greatly influenced by a steady diet of economic news reports with headlines inciting panic.
There’s no denying that reports of the political upheaval that resulted in a downgrade of U.S. debt, rising unemployment and plummeting stock prices are all legitimate causes for concern.
But when those stories dominate the headlines, they overshadow the fact the economy is still growing, even if it’s at a snail’s pace, Stock said, pointing out that most Federal Reserve economists still expect GDP growth of just over 2 percent in each of the next two quarters.
That’s a rosier outlook than that of most of the major banks, but even the banks’ revised forecasts still show growth — not two consecutive quarters of contraction that would define a recession.
JPMorgan, which revised its forecast in a note to clients Friday, said it expects gross domestic product to grow 1 percent in the fourth quarter rather than the 2.5 percent previously forecast, and 0.5 percent in the first quarter of 2012 instead of 1.5 percent.
That’s good enough for George Davis, chair of the economics department at Miami University, to dismiss talk of a double-dip recession, at least for the time being.
“As of now, the fundamental measures of economic activity, while not strong, are still OK,” Davis said. “Nonfarm payroll employment continues to grow, slowly, but still growing. New unemployment claims have been generally below 400,000, and industrial production has been growing,” he said. “We have had a lot of bad news too; sharply falling stock prices and dismal consumer sentiment numbers. But these are highly volatile and may overreact to temporary dramas in the press and politics.”
The bottom line, according to Cleveland-based economist George Zeller, is absent a major shock to the economy, like the financial collapse of 2008 or another war in the Middle East, the U.S. probably won’t experience a double-dip recession.
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