The Never-ending Story of the Economy

We’re at the halfway point in the calendar year and financial punditry is in evaluation and prognostication mode. Assessing the economic results of the past six months is irresistible to those looking to fill column inches or airtime and there will always be an audience for hot takes about where the economy is heading.

The problem is, nobody knows where the economy will be a week, a month or six months from now. That won’t stop – or even slow – the deluge of economic analysis pouring out of the financial press. But it gets worse.

In the quest for engagement, financial reporters and business analysts will almost universally take the low road of click bait headlines and purposefully controversial conclusions to rise above the cacophony of news articles and opinion pieces. Rather than offer reasoned, evidence-based perspectives on the state of the economy, many will choose to be as provocative as possible hoping to stand out in the crowd.

While all writing is storytelling to one extent or another, economic and financial reporting has shifted from a straightforward accounting of the facts available – statistical reports, historical data and the like – to frame a more compelling story. And every good story needs tension and conflict. To that end, while acknowledging the overall health of the economy, many writers will focus more attention on the darker possibilities that lie ahead, subtly – or more blatantly – waving the flag of impending recession as a possible outcome.

Of course, since economies run in cycles, there is always the possibility, if not the likelihood, of a downturn in the short term. But since it is impossible to predict when a recession has begun until after the fact, those doom and gloom predictions are more of a plot device than anything else.

But there is an even more fundamental reality the economic intelligentsia is ignoring.

We talk about “the economy” as if it was a holistic entity, some kind of all-encompassing thing that exists uniformly across the entire nation. But it isn’t. While the 50,000-foot view offered by unemployment statistics, capacity utilization and productivity figures, to name but a few, provides a quick snapshot of the overall situation, the economy is really a collection of untold thousands of individual personal economies that while related are all different.

The disconnect felt by many consumers between the statistical reality of the economy and their own emotional reality of the situation is a primary result of the lack of understanding of how “the economy” impacts people on a local level. Many consumers may not understand how the economy works, but they know how it feels.

When the news consumers get frames the economy as a story with heroes and villains – low unemployment, high inflation for example – it only offers and either-or proposition. While it is far more complex than that, telling that story is less compelling to the audience and therefore less likely to gain any traction and engagement.

The use of economic news as a rhetorical device to create tension in a story is a disservice to those interested in what is happening and how it will affect their lives. And like the boy who cried wolf, the financial press may one day find nobody is listening when they have important news to deliver.