Just about every day the headlines across the national media range from grim to utterly frightening. Today being no exception.
As someone who has written many a front-page headline, I know not to underestimate the power publications have in setting a tone. At what point does the steady drip — or the full fire-hosing, as the case may be — become torture? And more importantly, does the flood of doom-laden headlines itself deepen the economic crisis? Obviously the role of reporters and editors is to cover what’s going on in the world to the best of their knowledge and belief. No doubt the current economic reality is ugly. But the public mood matters, not least because so much of U.S. economic activity is based on consumer spending.
I’m working on a related magazine article right now and have been looking into how the media’s influence on the economy can be measured. According to a study published in 2004 from the Federal Reserve Bank of San Francisco, media coverage does have an impact — and sometimes can even serve to unhinge sentiment from reality:
In addition to moving in line with [data on] economic fundamentals, consumer sentiment also swings in response to the tone and volume of economic reporting by the media. Over the past 25 years, there have been several periods when the tone and volume of economic reporting pushed consumer sentiment significantly away from what economic fundamentals would suggest.
In an article published in Political Research Quarterly, economists concluded: “Consistent with previous research, we find that, overall, the media tend to follow negative economic conditions more closely than positive economic conditions.” And those findings were published back in 1995, when media ubiquity and consumption was a sliver of what it is today.
To its credit, National Public Radio’s “Morning Edition” tried in earnest on Tuesday to buck the trend, tracking down a relatively upbeat economic story in Youngstown, Ohio. (A thriving bit of technology entrepreneurship in the Rust Belt, of all places!)
Until it soon returned to the horror show: Zombie Banks Feed Off Bailout Money.