Interpreting Media Coverage of Economic Data and Policies

If there are five recent economic reports floating around and the media have time to cover just one or two of them, guess how they choose? They are almost always going to pick the one that appears to be the most jarring, concerning, and provocative. Think of it this way: They don’t report on the millions of auto drivers who arrive safely back at home; they report on the big accidents of the day.

With the economy, most of the time there are rarely any reports that are the equivalent of an auto accident, but some can more easily garner attention. Companies laying people off, product shortages, rising prices, and so on are the kinds of things that get lots of media coverage. Negative events almost always crowd out positive events.

Consider that when the stock market makes larger moves, its coverage gets more visibility and promotion in various media outlets. Large point drops in the Dow Jones Industrial Average are plastered on the front pages of newspapers, lead stories on the television evening news, trend on social media (thanks to all the posts there from media outlets), and so forth.

Keeping an Eye Out for Biases

It shouldn’t be news to you that many media outlets have a political bias, and that can and often does color how they cover various news, including economic news. For example, left-leaning media outlets (such as CNN, MSNBC, and most legacy media outlets) are happy to report negative economic news if doing so reflects poorly on conservative politicians. The same can of course be said the other way — that right-leaning outlets (such as Fox News and conservative talk radio programs) enjoy skewering liberal politicians by covering economic data that can make them look bad.

Now, please make it a habit to try to note the difference between opinion shows and actual news programs. Granted, there are fewer and fewer of the latter as more and more journalists are actually opinion people with a political agenda and bias.

Media Bias During the COVID-19 Pandemic

During the COVID-19 pandemic, especially during the early stages of the government-mandated economic shutdowns, I wanted to shout from the rooftops to all who would listen that the media was making many things, especially those related to the economy and financial markets, sound far worse than reality. And the result of this was that it was causing good people to make bad decisions with their investments and the rest of their personal finances.

There are many examples of misleading and extremely negative media coverage of economic reports, especially in the early weeks and months of the pandemic economic shutdowns. What follows are some that highlight the problem and how good people were misled.

Greatly overstating the number of unemployed

Every week, the government releases the number of initial claims, which tells us approximately the number of people who have just applied for unemployment benefits. For sure, in the early weeks of the government-mandated economic shutdowns, millions of people filed weekly for unemployment claims. As those weeks turned into months, many media outlets began mindlessly adding up the total number of initial claims filed — and the number soon broached tens of millions of people out of work — since the onslaught began.

Most of the media failed to point out the fact that significant numbers of people laid off early on began getting hired back, and that was actually reflected in the continuing claims data, which reports on the number of people who are still receiving unemployment benefits. Take, for example, the provocatively titled article from July 30, 2020, “We Are Experiencing Economic Devastation on A Scale That America Has Never Seen Before.” Within that piece was the statement, “Overall, a grand total of more than 54 million Americans have filed new claims for unemployment benefits during the last 19 weeks.”

Yes, that statement was technically true but was hugely misleading since most of those people had returned to their jobs. In fact, at that same time, continuing claims, which represented folks then collecting unemployment, stood at 17 million, a far cry from the 54 million cited in the article. This would suggest that about 37 million people had returned back to their jobs of the 54 million total who lost their jobs.

Most such articles also failed to point out that those out of work were receiving greatly bolstered benefits which in most cases for lower- and moderate-income earners led to them being paid as much (or even more) while on unemployment than they were earning in their recent job. Also, most non-high-income earners ended up receiving three sizeable government stimulus payments (spring 2020, winter 2020, and spring 2021).

Focusing on industries getting hit hard

Especially in the early months of the pandemic, the news media coverage of the economy also focused quite a bit on hard-hit industries. We regularly saw pictures and video segments of near-empty airports and hotel lobbies, and shuttered restaurants, sports arenas, and other entertainment venues.

This was real and important news and should have indeed been covered. However, this should not have been done to the exclusion of talking about the reality that some companies and sectors (such as big technology companies) were actually benefiting from the lockdowns and doing greater business.

I personally found this a bit hard to take, especially since the media continued to give megaphones to those who harped on the supposed dangers of going out to a restaurant, the local gym, and so on and then failed to discuss and show how crowded stores like Home Depot, Target, and Walmart were, for example. I remember being dumbfounded and shocked when I made a trip to a local Home Depot and had a hard time finding parking because the store was so flooded with customers. Inside the store, there were long lines and people weren’t exactly keeping their distance from one another, especially in the front part of the store.

So, as I watched big company stocks like Home Depot and many in the technology sector rapidly rebound after the March 2020 sharp selloff and then push through to new highs later in 2020, it wasn’t surprising to me at all.

Presenting annualized GDP and other data

The media frequently and often presents annualized data without disclosing, let alone explaining, that the data cited cover a far shorter period of time than one year. They did this with GDP data in the second quarter of 2020 during the height of the government mandated covid-19 economic shutdowns.

In July 2020, the second quarter 2020 Gross Domestic Product, which reports on overall U.S. economic activity, was released. Headlines blared that the second quarter 2020 GDP plunged 33 percent! Here are some sample headlines from that period:

“Economy plunges 32 percent as depression concerns loom”

“US economy's worst show since Great Depression, 32.9% fall in Q2 highest since 1947”

“U.S. economy plunges at titanic 32.9% rate in 2nd quarter”

Now, if you invested $1,000 in an investment that I told you plunged 33 percent soon after you invested, if you were fairly good at math, you could quickly determine the $1,000 investment was then worth just $670. But that’s not what happened with the second quarter 2020 GDP.

The actual release of the GDP data from the government makes reasonably clear that GDP dropped at an annualized rate of 33 percent in the second quarter. What this means is that the economy shrank about 9 percent in the quarter (similar to your $1,000 investment dropping in value to $910), and if it continued declining at that rate for a total of one year (an additional nine months), then it would be down 33 percent over a full year.

The media reporting annualized short-term economic data and failing to disclose that was done with plenty of other economic data in the months of March, April, and May 2020 when other economic measures, such as prices, dropped sharply. The media made those numbers sound worse by annualizing them. Annualizing sharply falling prices made the period sound like what happened during the 1930s Great Depression, when prices tumbled for an extended period of time.

Of course, in an economic downturn, more folks are suffering, and I’m not trying in any way to minimize that. But it’s important to remember that the media exaggerates the negative and uses anecdotes without supporting data to push particular narratives.