(Editor's note: To access some of these stories, registration or a subscription may be required. Please check the individual links for the site's policy.)
Eleanor Roosevelt once said, "You must do the thing you think you cannot do." In The Business Press Maven's case, that would mean speaking kindly of the business media's coverage of gross domestic product, but -- look Eleanor, I'm sorry -- their coverage stinks.
Yet Another Revision
Once again this week, we got a major revision of GDP -- a majorly major one. Loyal readers -- really, who isn't? -- know that this is part of a pattern. A pattern that makes The Business Press Maven want to rend his garments and throw himself in a lake.
GDP numbers are originally reported as set fact. A myriad of conclusions are drawn from the initial report, even though the numbers are revised significantly on a regular basis.
Then the revision comes out, and guess what? The business media matter-of-factly report the revision, drawing a whole new myriad of conclusions.
The business media win: They get double the copy from what should be one number and one set of conclusions.
But investors lose. They get lulled into thinking a recession is imminent when one isn't. Or that the economy is starting to overheat when it's not.
You can read some of
work to see how canyonwide the gap between initial reports and revisions are -- and how misleading those original headlines and articles tend to be to investors merely looking to get a bead on the economy.
It could all be solved with just a soupcon of restraint from the business media. They can say right in the first line what is the basic truth: that first-reported number rarely stands and is often revised. They can then go easy on any definitive conclusions. And headline writers should take a chill pill.
How bad is this sort of reporting and how insistent are the business media on making the same lame mistake again and again? As harsh as The Business Press Maven has to be, I usually don't name names. I hate to see any of you in a field where you are publicly flogged -- by your own employer and others -- for your mistakes.
But this GDP thing is so needlessly bad and has been going on for so long that I finally caved. I went nuts. Call The Business Press Maven a bull, baited one time too many. I threatened to weave the names of reporters who wrote about the original fourth-quarter GDP report without mentioning the chance of a revision into a
And, by golly, a few weeks ago I did it. Three journalists -- Jeremy Peters, Joanne Morrison and Jeannine Aversa -- all reported the 3.5 growth rate without any fair warning of revision and, with set conclusions spewing forth, were dealt the worst kind of blow. They were made subjects of The Business Press Maven's insulting limerick, perhaps the worst piece of poetry seen outside a bathroom wall.
But Jeremy, Joanne and Jeannine, guess what? I'm not done with you yet.
When the Commerce Department revised the number this week -- a
revision to 2.2% and perhaps only the first revision, as the final number is not due until later this month -- I decided to revisit our three guests of dishonor.
Did they take responsibility? Did they fit this into the larger lesson of these revisions? Did they --
Oh God, you probably have the same seeping sense that I do, huh?
Peters did not, as far as I can tell, report on the issue specifically, which I guess is one way of handling it. Eduardo Porter
did the reporting for
The New York Times
in an article called "Commerce Department Says U.S. Economy Is Weaker Than Expected." Especially, I might add, weaker than someone who took original reporting of that 3.5 number at face value.
The lead is a gem: "Analysts have been stumped by the apparent resilience of the American economy, which seemed to be bounding ahead at a 3.5 percent pace in the final quarter of last year even as the housing market fell and the Federal Reserve raised interest rates."
Skip to the next paragraph: "The paradox has been solved: the economy was not bounding."
They were stumped! It is a paradox, a mystery wrapped around a riddle wrapped around a question.
Dude, the only ones who couldn't figure out that the economy wasn't quite that hot were those who swallowed too much reporting. The article does, in fairness, have something all articles on the topic should (few do): a relative statistic, in this case, that the average revision since the early 1980s has been 0.5 percentage point.
The inclusion of that statistic is progress. But if you are aware of the statistic, how can the "apparent resilience" be such a mystery?
As far as Morrison goes,
same dreary stuff. She mentioned in her lead that the economy was "much weaker than first thought," which raises the question "By whom?" Never mind. She is then off and running with conclusions about what will happen under this "dreary picture" with the economy "tepid."
Wasn't this thing just coming close to overheating?
As I see it, Aversa tries to
address her miss in the first paragraph. Again, we get the "much slower than originally estimated," but we also get, right in the lead, that it was "the sort of unusually large revision that has happened only seven times in the last 30 years." Never mind that seven times over the past 30 years is once every roughly four years, certainly no mathematical fluke. And even at the 0.5 percentage-point average, we are changing the scope of economic growth, so conclusions are useless.
Eleanor Roosevelt also said, "You gain strength, courage and confidence by every experience in which you really stop to look fear in the face."
On this one, Eleanor, I was able to follow through. I looked fear in the face, and it looks a heck of a lot like coverage of GDP growth. And Eleanor? Come save me. I haven't slept since.
At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.
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. Fuchs appreciates your feedback;
to send him an email.