NewsBeat

September 2022 NewsBeat 8 The U.S. economy, as measured by gross domestic product, slumped for two con- secutive quarters to start 2022, according to recently released federal data, some of which is preliminary and may be revised in several weeks. In the last few weeks, some news outlets all but outright declared a recession, while others were more guarded, considering that other topline economic data, such as the unemployment rate, is in line with a healthy, growing economy. Conflicting economic information is what makes this recent GDP decline an unreliable recession harbinger. It's im- portant for journalists to aim for clarity in headlines and coverage and to help audi- ences understand what a recession is and isn't, who decides when the economy is in recession, and what really matters to most Americans' economic perceptions. Our four tips 1. Clarify the difference between quar- terly changes and annual rates, especially in headlines. In June the Bureau of Economic Analy- sis, the federal agency that estimates GDP, put out its final GDP numbers for the first three months of 2022, showing that the economy contracted at a quarterly rate of 0.4%. Some national news outlets, however, used the estimated annual rate — about 1.6% — in their headlines. The economy "slipped 1.6% to start the year" or "shrank 1.6% in the first quarter," these news out- lets said in headlines, implying that the economy fell by the estimated annual rate during the first three months of 2022. The estimated annual rate is calculated using an annualization formula. Annual- ization shows what would happen if the economy kept contracting or growing at the current quarterly pace. The Bureau of Economic Analysis pres- ents GDP at an annual rate because annual- ization allows comparisons over time that more accurately show what is happening in the economy than do quarter-to-quarter changes. Imagine a car race where one car is going a little faster than the other. It would make sense to think the faster car will win. But if the slower car starts acceler- ating at a higher rate, that says something different about what's happening in the race: The slower car will soon overtake the faster car. The point is to avoid presenting the es- timated annual rate as if it were the actual quarterly change. Journalists can take a few moments in their stories to explain annual- ization. The technical details won't matter for most audiences, but what's important to share is that annualization shows what would happen if the economy continued apace. This issue arose in a pronounced way during the early days of the pandemic recession, which lasted from February to April 2020. During the second quarter that year, U.S. economic output fell by about 9% from the first quarter — 31% annualized. Both numbers were unprecedented. But to say that the economy shrunk by a third in a single quarter would have been inaccurate. The scale is different now, but accuracy always matters. As New York Times eco- nomics reporter Ben Casselman explained in an Econofact podcast last October, "sometimes it just means making sure that we are taking a step back and helping peo- ple understand the way these numbers are reported." The Bureau of Economic Analysis does not make the quarter-to-quarter rates of change easy to find. Its main news release always refers to the annual rate in the first sentence. But you can find the quarter- ly rate in the technical note. The Federal Reserve Bank of St. Louis provides a variety of historical, inflation adjusted GDP data options. Another useful tactic to provide context on where the economy has been and where it is now is to compare annual changes rather than quarter-to-quarter — for exam- ple, from the second quarter of 2021 to the second quarter of 2022, rather than from the first to second quarters of 2022. Remember, the formulas the Bureau of Economic Analysis uses to calculate quar- terly and annualized rates of change are available. If your news outlet decides to use the estimated annual rate in headlines, be clear that is what you are referring to. 2. Report when data are preliminary. Let audiences know if it's the case that the economic data you're reporting on are preliminary and subject to change. For example, the Bureau of Economic Analysis will continue to analyze data and tweak its recent GDP numbers. The first estimate of GDP for the sec- ond quarter of 2022 came out July 28 and is known as an "advance" estimate. The second estimate was due Aug. 25 and the third and last expected estimate for second quarter GDP is due Sept. 29. Revisions to past years' GDP data are usually released in late July and are called "latest" estimates. Compare how updated estimates com- pare with original estimates. For the first quarter of 2022, the annual rate was -1.4% for the advance estimate, slightly better than the third estimate of -1.6%. Regardless of whether the economy shrank or grew, annual GDP rates change on average 0.6 By CLARK MERREFIELD Are we in a recession? 4 things journalists should know when covering an economic downturn "Sometimes it just means making sure that we are taking a step back and helping people understand the way these num- bers are reported." Ben Casselman Economics reporter

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