Tonight's report at the Associated Press in the wake of Wall Street's disastrous day isn't quite an Animal House moment — "Remain Calm! All Is Well!" — but it's more than fair to say that the wire service's Matthew Craft and Bernard Condon allowed quite a bit of wishful thinking into their writeup.
In late June, I noted that the AP's Ken Sweet asked a very important question about China ("IS THERE A POINT WHERE I SHOULD GET WORRIED?"), and failed to answer it. He also claimed that "The biggest concern is whether the drop in China's stock market will cause the country's economy to slow." The headline and opening sentence in tonight's AP dispatch attempted to maintain that false appearance (bolds are mine):
US STOCKS TUMBLE ON GLOBAL SLOWDOWN FEARS
Growing concerns about a slowdown in China shook markets around the world on Friday, driving the U.S. stock market to its biggest drop in nearly four years.
The question isn't whether there's a slowdown in China and elsewhere. The questions are how severe it is and how long-lasting it will be. To be clear, this isn't about whether the economies of Mainland China and other countries are contracting (yet). It's a question of whether their growth is seriously trailing expectations held by investors and policymakers just a short time ago.
People with their eyes open should have already noticed, as I did in June, that many others have been contending that growth has been slowing in China since April, if not earlier.
In today's report, the AP pair included several other highly questionable or contradictory contentions. Here are just a few.
First, concerning China:
Traders have been worried about slowing growth in China and its potential impact on the U.S.
In this sentence, slowing growth is accepted as a matter of fact — not a "fear" or "concern." Beyond that, even though he wouldn't say so in his actual writeup, the headline at Ken Sweet's June dispatch read: "Chinese stocks drop, but impact in US is seen as limited." On Friday, the Shanghai stock market closed just a fraction of a point above its July 8 low. The effect on the U.S. stock market, and likely the U.S. economy, has hardly been "limited."
Jeremy Zirin, head of investment strategy at UBS Wealth Management (said), "But there doesn't seem to be any signal that the weakness abroad is slipping into the U.S. economy," he said.
The U.S. economy has plenty of its own weakness, and doesn't need more. While the consumption-driven calculations which lead to Gross Domestic Product are still positive, several underlying hard-number indicators relating to production and sales most certainly are not. Here's just one:
The tables show that both raw and seasonally adjusted year-over-year manufacturing and trade sales have come in lower than last year in every one of this year's first six months. Based on GDP results during the past year, one would have expected this year's results to be about 2 percent higher than last year. Instead, they're about 2 percent lower. Falling oil prices don't even come close to explaining the difference.
Roberto Perli, head of global monetary policy research at Cornerstone Macro, said the market's recent slump likely means the Federal Reserve won't raise its benchmark interest rate at its September meeting. Fed officials gathering next month will have to weigh the global pressures against evidence of a solid U.S. job market and improving U.S. economic growth.
The U.S. job market is not "solid." Full-time employment is still below where it was in late 2007, and tens of millions of Americans among the record 94 million not in the labor force would like to be in the labor force. While acknlowledging that the welfare system is also a negative factor, the fact remains that many Americans who would like to be working aren't even looking because they don't see sufficiently meaningful and rewarding job-market opportunities.
Economic growth is not "improving." This year's second quarter was better than the first. But according to the Atlanta Federal Reserve's strongly prediction GDP model (current prediction: an annualized 1.3 percent) and the High Frequency model at Economy.com (1.6 percent), the third quarter is on track to significantly trail the second.
For all the markets' jitters, many economists say they remain confident that the U.S. economy is resilient enough to withstand a slowdown in the developing world.
The U.S. economy is so weak that people are obsessed and in some cases panicked over the idea that the Federal Reserve might raise interest rates above zero.
That doesn't seem like "resilient" to me — and it doesn't to anyone else who is getting their market and economy news from a more reliable source than the Associated Press, aka the Administration's Press.
Cross-posted at BizzyBlog.com.
