The Dog Not Barking about a U.S. Recession

The mainstream media is not yelling about a recession. Here is why that is surprising.

Photo by Jason Pofahl on Unsplash

As 2022 draws to a close, the U.S. economy is in a weird state. The Federal Reserve is trying real hard to squeeze inflation out of the economy. Since March the Fed has raised rates by more than 400 basis points, a faster increase than at any time in the past quarter-century. This usually presages a recession.

Despite these hikes, and the promise of more to come in 2023, job growth has only abated slightly. Unemployment is below four percent. Americans still have a lot of money in the bank to spend. Third quarter growth was just revised upwards. Inflation is starting to cool off. The country seems bound and determined to shake of the pandemic funk.

These contradictory trends have led to some heterogeneity in commentary the future of the U.S. economy. Some forecasters remain cautiously upbeat, arguing that the odds are against a recession next year. Many are pessimistic, predicting that a recession is extremely likely — in some cases, a 100 percent chance of a recession!

The hard-working staff here at Drezner’s World lacks both an accurate crystal ball and the necessary chutzpah to claim clairvoyance about what will actually happen in the next year or two. The possible futures for the U.S. and global economy will be the topic of an upcoming post. For today, however, let’s acknowledge that there are very legitimate reasons to believe that there might be a recession on the horizon. Given that expectation, two incongruous facts seem noteworthy:

1. Ordinary Americans seem moderately less concerned about a recession than earlier in the year; and

2. It would be understandable if the Americans tasked with reporting on economic news were yelling “RECESSION!” at the top of their lungs.

The data for the first point is pretty straightforward. According to the Conference Board consumer expectations are trending upward after a dip; the same is true for the University of Michigan’s Consumer Sentiments Index. The data from Gallup shows the same thing: Americans are more bearish on the economy than they were a year ago but less bearish than in the fall. None of this consumer sentiment data is good; it’s all worse than it was a year ago. Maybe the last month or so is a dead cat bounce. But the downward trend has reversed. Google Trends also suggests that concerns about a recession, while higher than a year ago, are much lower than earlier in the year.

Onto the second point. As the old aphorism goes, if your neighbor loses their job it’s a recession, but if you lose your job, it’ s a depression. The addendum is that if a financial journalist loses their job, it’s the end of the economy as we know it.

If you are an economic reporter, you would be excused for believing the U.S. economy has switched to Götterdämmerung mode. Consider that in both tech and the media worlds, 2022 has been a hard, hard year. In the media, Vanity Fair’s Charlotte Klein noted, “he anticipated ‘bad winter’ for media companies and their workers has arrived early. This week a number of major outlets announced layoffs, print cuts, hiring freezes, and other measures to address declining advertising revenue and annual losses.” CNN, Gannett, BuzzFeed, NPR, and the Washington Post have all had mass layoffs, leading to a wee bit of turmoil in their newsrooms.

In her write-up of these layoffs, the Guardian’s Lauren Aratani links it to declines in the tech sector as well:

While the media industry has experienced waves of layoffs over the last decade, with newsroom employment falling 26% since 2008, the tech industry has largely been seen as an endless flow of cash and opportunity. But the last several months have seen thousands of employees laid off by Meta, Amazon and Snap as the companies try to cut down on costs, including in marketing.

Morning Brew, a business newsletter, said it will cut 14% of its staff, about 60 employees. The company’s CEO, Austin Rief, said in a memo to staff that “there is a lot of fear and uncertainty among companies around the world.

“The first budgets cut are often those in marketing, and we’re seeing many of the largest ad-based businesses – such as Alphabet, Meta and Snap – see cuts in their revenues. Morning Brew is not immune to the movements of the ad market.”

The wave of tech layoffs also includes the likes of Netflix, Twitter, and Cisco.

So this is interesting! The overall economy is uncertain, but the sectors that are closest to an economic journalist’s field of vision seem like they are getting hammered. But this has not triggered a geyser of stories about how the economy is doomed. Why?

Conservatives would likely suggest that this is an example of the mainstream media’s leftward bias overwhelming their own economic gloominess; they do not want to be bearish on the economy while the Democrats control the White House. But there are two other explanations that are more compelling. The first is that, as noted above, the aggregate economic data paints a more complex picture, and the economic coverage reflects that complexity.

The second is that even in media and tech, the story is not just about layoffs but about churn. In tech, for example, Insider’s Aki Ito noted earlier this month that even as there have been waves of layoffs, those laid off have found new (and sometimes better) jobs:

Even as the tech sector has been hammered by mass layoffs this year — more than 140,000 workers since March, by one count — the vast majority who have been let go haven't remained on the sidelines for long. According to an analysis of laid-off workers conducted by Revelio Labs, a workforce-data provider, 72% have found new jobs within three months. Even more surprising, a little over half of them have landed roles that actually pay more than what they were earning in the jobs they lost.

The findings underscore just how strong the job market remains, even in the face of a cratering tech sector. All too often, losing your job can pose a major career setback — especially when tens of thousands of others in your profession are being laid off all around you. But this time, it appears, getting a pink slip might even, in many cases, provide a career boost. In the midst of a wave of wholesale layoffs, many tech workers are somehow bouncing back stronger than ever….

Because tech workers are typically college-educated, with specialized skills in high demand across many industries, their chances of finding new jobs are pretty good in any economy. But right now, those odds are unusually good.

The media is another story entirely, but even in the arena of old-fashioned journalism, buzzy startups like Puck, Semafor, and The Free Press are expanding their wares.

It seems weird to explain why a dog has not barked in media coverage. And yet, with accusations of media bias constantly being bandied about, it seems worth mentioning a bias that is not manifesting. Despite doom and gloom pervading the newsrooms of the mainstream media, it does not appear to have affected their coverage of the U.S. economy. That could change in 2023 — but so could the real trajectory of the U.S. economy.