Catherine Falls Commercial/Getty Images
- The media has been more negative about the economy than the underlying data would suggest, a new study found.
- The tone of economy stories since 2018 doesn't match variables such as GDP, inflation, and unemployment.
- This may have fueled a disconnect between how the economy performs and how people think it's performing.
It's true, blame us — partly.
The economy is doing well by most measures, but many Americans don't think so.
For many, the cumulative impact of inflation, high-profile job cuts, the views of leading politicians on the economy, and gloominess among friends could be the culprit.
The media may also be to blame.
A new Brookings study found that since 2018 — and more specifically over the last three years — the media has taken a more negative bias toward covering the economy than the fundamentals would have suggested, the study found.
Brookings suggested that negative headlines may explain, more than some other factors, why consumer sentiment has stayed low over the last few years. These factors, such as lack of affordable housing, concern for the economy's future, and higher price levels, don't fully explain this disconnect between sentiment and economic performance — termed the "vibecession."
Brookings researchers hypothesized that US households view the economy as less robust when economic news is more negative. Using the San Francisco Federal Reserve's Economic News Sentiment Index, the researchers looked into the sentiment of economic news stories from major media outlets and compared their tone with what would be expected based on the state of the actual economy. Variables analyzed included GDP, the Consumer Price Index, unemployment rate, and equity prices.
Between 2018 and 2020, the tone of economic news coverage was determined to be more negative than what their model of the relationship between economic news coverage and those economic variables between 1988 and 2016 would predict. The tone became even more negative than predicted between 2021 and 2023, partially exacerbated by the pandemic.
"Our simple econometric model adds to evidence that biased sources of information play a role, and suggests that economic news has become systemically more negative beginning in 2018, with the negative bias growing over the past three years," the authors wrote. The authors further acknowledged their assumptions that systematic bias in media coverage could drive faulty perceptions of how the economy is performing.
Most recent data suggests a pretty strong economy in the US. Inflation remains at 3.1% — above the Federal Reserve's 2% target but well below a year ago at 6.7% — while the unemployment rate has stayed below 4% for two years. Meanwhile, the economy has grown faster than most economists' expectations in 2023, while racial and gender income inequality has narrowed. Layoff rates are also still near historic lows.
But Americans don't think the economy is doing that well. Despite an increase in December, the University of Michigan Consumer Sentiment Index still reveals people feel rather gloomy about the economy, with levels matching those of the Great Recession in 2009. Meanwhile, a December Bankrate study found that 59% of US adults feel the economy is in a recession.
Still, many Americans feel better about their local economy than the national economy. That disconnect could also be driven by media negativity, as people may rely more on what they see in the news to get a sense of what's going on in the broader country rather than in their own backyards.
Will Stancil, a researcher at the University of Minnesota, previously told BI that while blue-collar workers have seen major improvements in hiring and salaries, layoffs at tech and media companies have taken up many of the headlines. Additionally, prices for items people buy daily, such as food and clothing — as well as larger purchases such as housing — are still increasing. Wage gaps and racial employment gaps have also meant improvements in the economy only impact some demographics.
"One of the weird things about the recent economy has been the way that it is very strong for people on the bottom and for entry-level workers and for younger people, but it's a lot weaker obviously for media, for tech, for wealthier people," Stancil said. "Of course, these are the voices that have access to the platforms to spread ideas."