Great expectations. That’s what typically fuels business coverage when emerging from a recession.
Spring has sprung. Happy days are here again. The darkness is followed by the dawn. Stock prices, earnings forecasts and the tone of news reports increasingly take on an upbeat tone. Everything and anything can be construed as a springboard or a bellwether.
Young people buy more clothes. The most recent American Eagle Outfitters quarterly earnings rose 81 percent compared to the year-earlier quarter.
The world awakens to business. FedEx Corp. earnings more than doubled in its recent quarter, taken as indication that the global economic recovery is expanding, and it also increased its prediction for the current fiscal year.
People spend more on food. Domino’s Pizza profit more than doubled to $23.6 million in the recent quarter on higher sales, better margins and lower interest expenses.
Stock prices factor in the expected increases well ahead of time.
But journalists must be careful, for rarely does everything improve as planned.
For example, American Eagle Outfitters also closed its money-losing Martin+Osa outlets due to poor sales. Fedex chairman, president and CEO Frederick Smith cautioned that housing and bank credit are still major problems for business.
Recovery is often a messy business. More than 200 bank failures since 2008 and counting is not a pleasant reality. The deep fiscal problems of Greece, California or Toledo, Ohio, won’t be solved overnight. There are also complications having nothing directly to do with the economy.
For example, AT&T announced a $1 billion one-time charge against quarterly earnings because the federal health-care changes removed the deductibility of the subsidy for retiree prescription-drug benefits. John Deere said it would take a $150 million charge, Caterpillar $100 million and many others joined the chorus. They’d like a little sympathy please.
Here’s what to keep in mind when covering an expected economic resurgence:
Low interest rates and increasing signs of recovery typically lead to growth in earnings for companies and, at some point, improved job prospects. But just as it was the journalist’s responsibility not to get caught up in the hype of boom times, it is important not to get bowled over by positive signs coming out of recession either.
The past decade was loaded with headlines, teases and video reports that business journalists wish they could take back. All of business journalism has been judged harshly as a result. Let’s face the coming decade with both feet on the ground and the realization that we are accountable for what’s written before, during and after all economic periods.