March 1, 2007

Exactly Why Should I Believe That the Formerly Mainstream Media Isn’t Rooting for a Bad Economy?

Two reports from earlier this week, one that warned of a “likely recession,” and another that flat-out declared a non-existent “manufacturing recession,” have to make you wonder, especially considering a positive report from the real world that came out earlier today.

First — On Monday, the Associated Press turned murky comments by Alan Greenspan into “Greenspan warns of likely U.S. recession.” Hundreds of papers, including The Washington Post, published the headline online and in print. Only a day later, AP issued a “never mind” report (“Economists: Recession unlikely”).

Second — On Tuesday evening, the New York Times (may require registration), in an article by David Leonhardt, declared:

For Manufacturing, a Recession Has Arrived

The nation’s manufacturing sector managed to slip into a recession with almost nobody seeming to notice. Well, until yesterday.

Wall Street was caught off guard when the Commerce Department reported yesterday morning that orders for durable goods — big items like home computers and factory machines — plunged almost 8 percent last month. That’s a big number, but it really shouldn’t have come as too much of a surprise. In two of the last three months, the manufacturing sector has shrunk, according to surveys by the Institute for Supply Management that have been out for weeks.

It sure looks as if Leonhardt was engaging in wishful thinking:

  • The two months where manufacturing “shrunk” (November and January) had readings above (49.5 and 49.3, to be exact). But December came in at 51.4 (second item at link); average the three, and you have 50.1. Anything above 50 means “expansion.” Not that being barely above 50 is anything to throw a party over, but it’s NOT a contraction.
  • Give Leonhardt (an undeserved) benefit of the doubt. Maybe January’s reading plus January’s crummy durable goods report signaled bad news for the manufacturing sector. Surely these are signs of a possible “shrink,” but do they mean recession already exists? Call me old-fashioned, but a recession is supposed to mean two consecutive quarters of contraction, not one single month. (Yes, I know that there is a group of sage oracles whose job it is to tell us if we’re “really” in a recession or not. I questioned the work, and especially the objectivity, of that supposedly “nonpartisan” group, the National Bureau of Economic Research [NBER], last year.)
  • There’s more — Every month, when ISM publishes its “PMI” Manufacturing Index, the announcement has this explanation (link is to January’s report; scroll down) that Mr. Leonhardt and his multiple layers of fact-checkers at the New York Times “somehow” neglected to notice:

    A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting. A PMI in excess of 41.9 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates that both the overall economy and the manufacturing sector are growing.

    Last time I checked, “an expansion of the overall economy” meant “growth,” the opposite of “contraction,” and well short of a “recession.”

Now, from the real world – The ISM Manufacturing Index for February came in at 52.3. Memo to the Times and the other media vultures waiting for the economy to tank: This means “expansion.” You’ll have to find your red meat somewhere else.

The first response at the ISM link from someone in the Chemical Products industry inadvertently says it all about Formerly Mainstream Media coverage of the US economy in the past few days:

“Business is booming in the fertilizer business.”

With all the economic reporting manure being produced by the business press, it’s no wonder.

Recession, reschmession.

Cross-posted at


UPDATE: A follow-up: A Brief Primer on the New York Times’ Economic Terminology

UPDATE 2: The Times looks weaker by the moment. This report from AP says that Wall Street expected a neutral reading of 50 — which the Times could have and should have known at the time the “manufacturing recession” article was written.


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