I've had it. The Business Press Maven soon may be forced to drive his Tin Lizzie of a car over the typing fingers of any business journalist who fails to supply the proper context when reporting the gross domestic product numbers.
Sure, I may have been declared the best journalism critic in the nation. But even as countless groupies throw themselves at me, my life will remain hollow until I reform the nation's lax GDP reporting habits. Or at the very least, until I make clear to every investor just how they might easily be misled by this nonsense.
I'm speaking about the way GDP numbers are reported as if they're carved in stone, when we all know they are often revised. It happened again this week -- and hell hath no fury like a Business Press Maven ignored.
This week we were greeted with headlines about how "The Economy Grew Faster Than Expected in the Second Quarter." That's because gross domestic product growth was revised upward from a slightly anemic 2.5% to a pretty respectable 2.9%.
The problem was ... when that 2.5% number was reported, little mention was made of how it was a first-stab number. Articles treated 2.5% as gospel and went on to draw (false) conclusions.
This is nothing new, unfortunately.
Back in March, the Commerce Department revised its estimates of the previous quarter's growth. You may recall that I
got all hissy about this same subject then.
See, initially the growth for the fourth quarter of 2005 was put at 1.1%, which caused panic-mode headlines about the nation being on the cusp of recession. That little detail about the possibility (nay, near certainty) of upward revision? Almost always buried deep within articles in a butt-covering little mention like "initial government estimates of economic growth are frequently revised higher."
Are they ever! And higher doesn't even begin to describe what happens. The fourth-quarter number was later ramped up to 1.6% -- almost a 50% increase.
Look: 1.6% growth is still no great shakes. But a nearly 50% markup renders the first wave of imminent-recession stories pretty useless. You'd a thunk the business media, those short-sighted little devils, would have learned their lesson when the same thing happened a year earlier.
No such luck. It seems that when the business media gets egg on its face, it merely wipes it off to make room for the next egg.
Look at the fourth quarter of 2004, when we got a lot of headlines about how economic growth had slowed from 4% the previous year to 3.1%. That's a pretty significant drop, no? Well, no. Revisions came out and guess what? The economy had actually grown at a 3.8% rate, a rock skip or rounding error from 4%.
Look, spare me the letters about how there is an element of political bias to this reporting. If only. That'd at least mean that the business media knew better. But the same thing happened during the Clinton administration.
Outside of handing out the dreaded Business Press Maven "Back of the Hand" award to every business journalist and editor who downplays the chance of revisions, I can do just one thing.
I beg of you -- The Business Press Maven is down on his knees -- to please insert the words "rough draft" into any preliminary reports on the GDP numbers. And, dear reader, if it appears that the economy may have turned some corner, don't act! Wait for the final draft -- it's the only one that means anything.
The business media's apparent lack of awareness of how frequently GDP numbers are revised highlights its general ignorance of history. Many journalists are attracted to the field because of a longtime interest in politics, so in that area, they tend to have a longer-term knowledge base. Sports journalists were probably sports fans growing up, so there too there is often a working knowledge of the past.
But business? Puh-lease. In business, the opening bell is ancient history by noon.
So, as you know, I see it as my chief obligation to highlight those infrequent instances when a good take on business history is used to inform investors of what might happen in the future.
The New Yorker's
James Surowiecki get this week's coveted Business Press Maven "Nod of Approval" award.
Y'know all that talk about how the auto companies formerly known as The Big Three and now known as The-Medium-Sized-and-Reeling Three need to prioritize and reorganize and downsize? You know, they basically have to get rid of a bunch of brands if they want to live to see the light of day?
Well, if it's so obvious that The-Medium-Sized-and-Reeling Three need to prioritize, then why haven't they? That's where Surowiecki taught even The Business Press Maven a lesson by looking at the past through the eyes of the historically difficult relationship between automakers and the dealers.
In sum: For nearly a century, it's been a tough one for the automakers, who essentially created their own monsters by handing out local franchises with considerable stakes and power bases of their own.
Want to simply eliminate a brand, whether it's Pontiac or Buick? Good luck doing it without shelling out billions. If the automakers hadn't given in to temptation early on by figuring that independent dealers could absorb excess inventory -- well, they might not be in as fine a mess as they are now, with streamlining much easier said than done.
James, good work. And if my foreign-made Tin Lizzie ever comes bearing down on your lovely typing fingers, rest assured that it'll stop on a dime.
A journalist with a background on Wall Street, Marek Fuchs has written the County Lines column for The New York Times for the past five years. He also contributes regular breaking news and feature stories to many of the paper's other sections, including Metro, National and Sports. Fuchs was the editor-in-chief of Fertilemind.net, a financial Web site twice named "Best of the Web" by Forbes Magazine. He was also a stockbroker with Shearson Lehman Brothers in Manhattan and a money manager. He is currently writing a chapter for a book coming out in early 2007 on a really embarrassing subject. He lives in a loud house with three children.