I had an interesting conversation with the students in my Economics Reporting class today. I had them read “Ignoring the Alarm,” an article in the March 2003 issue of American Journalism Review, before class. And we discussed the issue of whether the media is partly or wholly to blame for the economic downturn in this country in 2001-02 due to its overly boosterish coverage of the economy in the years preceding.
Few thought that the media was to blame, which was heartening, although they did agree with the premise of this article that the media did fall down on its job of being the watchdog.
The longer conversation in class, however, was the discussion about the increasing number of “prediction” stories on economics and business coverage. These are the stories, for example, that poll economists the week before the Federal Open Market Committee meets to write a story attempting to predict whether interest rates will go up, go down, or remain the same. These stories typically appear on the wire services or in major metropolitan papers the weekend before an FOMC meeting.
Another example of this type of story is predicting what will happen to the Gross Domestic Product, or to the unemployment rate. Economists love to give their predictions to journalists, but my experience is that rarely do these stories predict with 100 percent accuracy what has happened in the economy.
And then there’s the stock-picking stories, like Money magazine’s top 10 stock picks for 2005 that imply that these stocks are the ones you have to buy to make money in the market.
My students thought a lot of these stories were sleazy because they put business journalists out on a limb, and I didn’t have a good rejoinder to that argument other than it was the economists making the predictions and the reporters were simply recording them for posterity. I told them that when I was at Bloomberg News, some of the most-read stories were the ones predicting what was going to happen to interest rates or the GDP. The traders loved those stories, and used them to speculate on which way the market would go. In addition, magazines that promote stock picks on their covers are typically strong sellers and make money for the publication.
But I do think that the field of business journalism has entered a dangerous area by taking the “prediction” story to great lengths. And one of these days, a “prediction” story is going to cause great embarrassment.
I am reminded of the poll that Fortune magazine did for the 1940 election that called FDR’s defeat. It took them a while to live that one down.