If that wasn’t enough evidence of the hand wringing, the Chairman of President Trump’s Council of Economic Advisers, the respected Tomas Philipson, recently indicated that he was worried about the steady negative drumbeat in the press: that a recession might be just around the corner. Philipson put his finger on the problem when he said, “The way the media reports the weather won’t impact whether the sun shines tomorrow. But the way the media reports on our economy weighs on consumer sentiment, which feeds into consumer purchases and investments.”
Philipson understands very well that negative news can become part of a negative feedback loop that can result in a plunge in the public’s state of confidence and a recession. He also knows how to follow metrics that gauge the public’s expectations and confidence in the economy, like the University of Michigan’s Consumer Sentiment index. The chart below shows the course of that index. The last reading on the chart is for August. It is notable that Consumer Sentiment took a dive, falling from 98.4 in July to 89.8 in August. That’s the lowest reading since October 2016. It’s clear that the President’s Council of Economic Advisers took note, causing Chairman Philipson to spring into action.