Economic narrative all bad; reality quite different

Here's a headline this morning from Bloomberg: "No Recession for U.S. as Forecasts Improve." The piece summarizes what seems to be happening with the economy: Sluggish growth and unlikely prospects of a downturn. This is not big news for anyone who has been paying attention to economic reports in recent weeks. The Conference Board's Leading Economic Index has been holding up, while the University of Michigan's Consumer Sentiment Index has been in the tank for months. So why the disconnect? From Economix:

In part, say some economists, it is because of increased cynicism about the ability of the president and Congress to handle the economy. Indeed, the University of Michigan's consumer confidence index shows a sharp drop this summer during the debt crisis debate. While it has improved slightly since then, it still remains at its lowest levels since early 2009. Economists say that the lack of confidence is also driven by structural changes to the American economy: unemployment has remained high even as the economy has grown slowly, while wages have stagnated for those who are working.

I'll throw something else into the stew: The media's general lack of understanding about what the economy is doing and why it's doing it. The default position is that everything stinks and everyone is miserable. Not true - certainly not based on the retail sales numbers. From a recent report by Beacon Economics:

Despite the double-dip hype in the media, the view at Beacon Economics is that the recovery continues to plug along, though not at the pace that we would like to see. This recovery was always going to be a slow one. California had one of the largest housing and consumer spending bubbles in the nation and has since suffered one of the largest downturns relative to most other states. That said, most of the indicators show that the state continues to recover from the Great Recession.

Unfortunately, when all you hear is terrible news, a kind of self-fulfilling prophecy kicks in. That's what we really should be worried about.