Though economists are less than certain, a U.S. economy in recession is a foregone conclusion for many in the media. The April 3 NBC “Today” show offered a light at the end of an economic tunnel, however.
Natalie Morales declared recessions and booms are “all part of a never-ending economic cycle” and told viewers not to panic “because it’s psychologically driven.”
“In the last 50 years the U.S. economy has recovered from six recessions and after each there were periods of great booms,” Morales reported. “So, many experts say to really understand what’s going on and perhaps to benefit in the long run, you need to take a lesson from history.”
Morales began with the 1973 recession, spurred in large part by rocketing oil and gasoline prices as a result of the OPEC embargo against the United States.
“Government spending on the Vietnam War coupled with rising unemployment created a slump. America was in a recession,” Morales said. “Inflation doubled in 1972 to more than 6 percent and reached an all-time high (11.04 percent) the following year.”
Morales didn’t provide context to explain how current conditions compared to the recessionary conditions in the early ‘70s. Unemployment was 4.8 percent in February 2008, compared to 6.5 percent in January 1972 and a high of 9.1 percent in March 1975.
Inflation in 2007 was 4.1 percent, compared to 6.2 percent in 1973 and 11.03 percent in 1974.
But, Morales said optimistically, “Just six months after its lowest point, the economy saw growth in the double digits. Suddenly people were buying again.”
“By the mid-1980s things started to really boom. Big hair, big clothes and big bank accounts were in,” she said, setting up for the stock market crash – a drop of more than 500 points – on Oct. 19, 1987.
Much like today, when the media seem eager to declare the economy in a recession or even a depression, fears of economic turmoil were prevalent in 1987. But optimism won out. “Despite fears of another depression,” Morales noted, “the market rallied immediately after the crash, regaining nearly 300 points by the end of that week.”
In the aftermath of the 1980s recession, technological advancements gave Americans new ways to spend their money. “But just as fast as the information superhighway created wealth, it seemed to take it all away,” Morales said. The dot-com bubble burst led to the 2001 recession.
That recession ended in a housing market boom, the results of which are now setting in as Americans who borrowed more than they could afford are suffering the consequences.
The attempt at reassurance and optimism sets Morales’ segment apart from much of the doom-and-gloom reporting on the economy, where reporters have repeatedly compared current conditions to the Great Depression.
But the report was based on the assumption that the economy is already in a recession, something economists won’t know for sure until the middle of 2008 at the earliest. A simple definition of recession is two consecutive quarters of negative economic growth.
The last quarter of 2007 saw 0.6-percent growth in GDP – sluggish, but growth nonetheless – and federal officials including President Bush remain steadfast in predicting conditions won’t worsen to the point of negative growth but may remain sluggish for the first quarter of 2008.
