The future state of the economy is constantly being debated over and questioned if there are implications of a nearby recession. Some economists believe that people are over reacting to small signs while others disagree believing that there are many out of the ordinary trends which are very concerning. This article relays that a huge indication that almost always occurs before a recession is a steep decline in growth in payment employment, in which America has not seen recently. However, recessions are many times not predicted until the beginning stages have already occurred. Whether or not the worrisome signs are normal trends the economy faces, there is still instability in the market and worried consumers are cutting back their expenditure. According to the author, "a recession, after all, is nothing more than a rut of self-ratifying pessimism," so perhaps the media's intimidating headlines are partially the source of falling markets. In the past, there has been room for consumers lack of confidence and the government has been able to intervene and reassure the consumers with cutting rates, however now it is uncertain the government will be able to step in and we can only hope consumers regain their confidence.
http://www.economist.com/blogs/freeexchange/2016/01/doom-and-gloom
I find this article interesting because I never noticed until now that the news does make the economy sound worse than it really is. It's surprising how big of an effect it makes on consumers as they are cutting back on their expenditures.
ReplyDeleteThe power of the media is so often glanced over or brushed off as being trivial and biased, but whether it is reliable or not the media exerts control over consumers' perceptions of the market. The power should not be treated as a small thing.
ReplyDeleteI think this article has overstated the risk of having a recession. As far as I can see, the market in the U.S. is doing okay. Housing prices are still rising, unemployment rate is close to nature rate of unemployment, labor participation rate is steady given the ‘baby boomer’ generation is aging, interest rates are extremely low, and oil price has fallen. And even if the whole economy is facing a recession, the ‘invisible hands’ will push the economy back on track, but definitely not “ hoping that animal spirits find a way to perk themselves back up.”—Said by the author..
ReplyDeleteIt is very interesting how big of a role the media plays in affecting consumer opinions the US economy. Too often, people will listen to the media and accept their opinions as fact and will not delve deeper into the issues to form an opinion on their own. This is very dangerous because with everyone having the same opinion, we're unable to discover when we may be wrong because no one is disagreeing about each other's viewpoints. I feel confident about the slow, yet continual, rise of the US economy since its 2008 troubles. Consumer spending is one thing that has continued to lag, but it is one of the easiest factors to sway, and because of this, I am not worried about an impending recession in the near future.
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ReplyDeleteI also agree with Trey that people too often accept opinions they read on the media. It is interesting that the author feels that a recession is 'self ratifying pessimism'. I think that a lot of times, this is a result of people not having their own opinions possibly due to a lack of knowledge specific to the economy. Additionally, I think the word recession holds a lot of power when used in the media because of the fear associated with it. On the other hand, I agree with Vera that the article has overstated the risk of recession, especially because the article states that some indicators of recession have not been spotted within America.
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