Unemployment expectations, excessive pessimism, and news coverage

This study employs monthly survey data and information obtained from media content analyses to investigate the potential link between (negativity in) economic news coverage and the pessimism in German unemployment expectations. For the period from 2001 to 2009, time-series estimates do not indicate a link in the short-run, but the cumulative effects of repeated media coverage affect long-run attitudes. A single negative report has a long-term effect similar to that of a positive one, but the quantitative dominance of negative over positive news causes an asymmetric reaction in unemployment expectations, which promotes pessimism.

► This study investigates how news media affect unemployment expectations.
► Cumulative effects of repeated news coverage cultivate attitudes permanently.
► Negativity in reporting promotes pessimism in the long-run.