With economic pessimism becoming a growth industry, it's interesting to note that the glummest of the glum work in a field with the most potential to influence how everyone else is feeling: the media.
Pollsters Ipsos MORI recently asked the people of Britain to cite the most pressing issue facing their country. Out front by a country mile was 'the economy', with two thirds citing it as the most important challenge.1
And in terms of occupations, Ipsos found journalists were the most negative, with 96 per cent of that grouping believing the economy would get worse.
"Out of all the audiences we look at—businesses themselves, consumers, employers, the people who are most negative are the journalists," Ipsos managing director Ben Page told the Financial Times.2
As to why journalists are so gloomy, there are a number of theories. One is that things really are that bad. Journalists, being closer to the newsmakers, see through all the 'happy talk' and feel compelled to tell their audiences and readers how it really is.
But if that were the case, why are investors expressing greater optimism, as reflected in the large bounce in risk assets recently? As of early May, the US S&P-500 was 34 per cent above the lows struck two months before. Other major world indices were up by between 20 and 40 per cent.3
Of course, no-one knows whether the bottom really has been reached. But it seems for now that there are enough green shoots of recovery to encourage those risking their capital to move back into the market.
While journalists are routinely plugged into hundreds of news sources, it seems highly unlikely that they would have any better access to new information than the market in aggregate, which—unlike the media—tends to be a forward looking indicator.
A second explanation for the media tendency to gloom is that pessimism is a professional hazard for journalists. It goes with the territory in a job that requires the individual journalist to exercise extreme skepticism in a world driven by PR spin doctors.
But this tendency to see the glass always as half empty means journalists can be late to break the story when the news really is good.
A third theory is that bad news sells. Like ghoulish spectators at grizzly car accidents, the public is pathologically drawn to tales of the misfortunes of others. Knowing this, the media tends to give prominence to the gloomy.
But is that really true? What sells are great stories—good or bad. When the media seems routinely focused on the negative, it is often because the individual editors and reporters concerned have grown lazy and reflexive.
A final theory is that the newspapers are full of gloom because the mainstream media itself is in something of a death spiral as the internet robs it of advertising revenue, circulation, ratings and jobs.
Newspapers and network television were already facing a structural crisis before the global recession came along. For journalists, then, the economic crisis is just the icing on an already unappetizing cake. One estimate puts the loss of newsroom jobs in the US alone last year at nearly 6,000.4
That last theory might be the closest to the truth right now.
For the average investor struggling to comprehend the daily financial news headlines, it may be worth reflecting on all this. Are things really as gloomy as the headline writers say they are or are they just having a really bad day?
1'Economy Still the Most Important Issue Facing Britain, Ipsos MORI, May 1, 2009
2'Truth Tellers or Doom Mongers?', Financial Times, May 4, 2009
3Bloomberg data
4'The State of the News Media 2009', Pew Project for Excellence in Journalism
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