Economy

Opinion | ‘I’m OK, but Things Are Terrible’

Published

1 year ago

September 8, 2023

If President Biden loses his bid for re-election, a key factor will be the widespread perception that the economy is doing badly on his watch. Poll after poll shows Americans rating economic conditions as very bad and giving Biden very low approval for his economic management.

The strange thing is that these bad ratings are persisting even as the economy, by any normal measure, has been doing extremely well. Indeed, we’ve just experienced what Goldman Sachs is calling the “soft landing summer.” Inflation is down by almost two-thirds since its peak in June 2022, and this has happened without the recession and huge job losses many economists insisted would be necessary. Real wages, especially for nonsupervisory workers, are significantly higher than they were before the pandemic.

Oh, and to correct a widespread misconception: No, these figures don’t exclude food and energy prices. The government does calculate measures of “core” inflation excluding those prices, but those are only for analytical and policy purposes.

So why are people so negative about an economy that by all standard measures is doing very well?

When I first began writing about the disconnect between public economic perceptions and what appeared to be economic reality, I got a lot of pushback, of two distinct kinds.

First, there was the argument that there were real economic problems that justified public negativity. People really hate inflation, even if their incomes are keeping up, and a year ago real wages were still somewhat depressed. But at this point inflation is way down and real wages are up.

Second, there was the argument that, in effect, the customer is always right: If people feel that they’re doing badly, you should figure out why, not lecture them that they should be feeling better.

But here’s the funny thing: There’s substantial evidence that people don’t feel that they personally are doing badly. Both surveys and consumer behavior suggest, on the contrary, that while most Americans feel that they’re doing OK, they believe that the economy is doing badly, where “the economy” presumably means other people.

Let me run through some of this evidence.

The Federal Reserve conducts an annual survey of the economic well-being of households. At the end of 2022, 73 percent of households said that they were “at least doing OK financially,” down from the previous year (presumably because of the end of many pandemic aid programs) but not significantly below the number in 2019. In 2019, however, half the population said that the national economy was good or excellent; in 2022 that number was down to just 18 percent.

Are people still doing OK? Well, consumer spending has been strong, suggesting that American families aren’t too worried about their financial situation.

What about inflation? According to a recent poll by The Wall Street Journal, 74 percent of Americans say that inflation has moved in the wrong direction over the past year — a result stunningly at odds with the data, which shows inflation plunging. But are people really experiencing rising inflation?

As it happens, several organizations regularly survey consumers to ask how much inflation they expect, and these expectations have come way down, which is completely at odds with claims that inflation is getting worse.

Even better, I’d argue, are surveys that ask businesses not about the national economy but about their own prices or costs.

The National Federation of Independent Business asks small-business owners whether they have increased or reduced prices over the past three months. More businesses are raising than are lowering prices, but the difference is much smaller than it was last year. The Federal Reserve Bank of Atlanta asks businesses how much they expect their costs to rise over the next year; their median answer is 2.5 percent, down from 3.8 percent last year.

So when people are asked about their own experiences, not “the economy,” what they say about inflation is consistent with official data showing rapid improvement.

The bottom line is that there is a real disconnect between what Americans say about the economy and reality — not just official data, but even their own experiences. It’s silly to deny that this disconnect exists.

What explains negativity about a good economy? Partisanship is surely a factor: Republicans’ assessment of the current economy roughly matches what it was in June 1980, when unemployment was twice as high and inflation four times as high as they are now. Beyond that, the events of the past few years — not just inflation and higher interest rates but also the disruption Covid caused to everyone’s lives, and perhaps the sense that America is coming apart politically — may have engendered a sourness, an unwillingness to acknowledge good news even when it happens.

Now Biden administration officials are trying hard to sell their economic accomplishments, as they should — if they don’t, who will? But will public opinion turn around? Nobody knows. We’re living in a world in which what people believe may have little to do with facts, including the facts of their own lives.

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Economy

Statistics Canada reports wholesale sales higher in July

Published

8 hours ago

September 13, 2024

Anne Joseph

OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.

The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.

The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.

The personal and household goods subsector fell 2.5 per cent to $12.1 billion.

In volume terms, overall wholesale sales rose 0.5 per cent in July.

Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.

This report by The Canadian Press was first published Sept. 13, 2024.

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Economy

B.C.’s debt and deficit forecast to rise as the provincial election nears

Published

3 days ago

September 10, 2024

Anne Joseph

VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.

Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.

Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”

The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.

Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.

“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”

Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.

Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.

Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.

B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.

The election is expected to be called on Sept. 21, with the vote set for Oct. 19.

“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”

Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.

Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.

The premier said that now is not the time to reduce supports and services for people.

Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.

Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.

This report by The Canadian Press was first published Sept. 10, 2024.

Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.

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Economy

Mark Carney mum on carbon-tax advice, future in politics at Liberal retreat

Published

3 days ago

September 10, 2024

Anne Joseph

NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.

But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.

He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.

Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.

Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.

Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.

This report by The Canadian Press was first published Sept. 10, 2024.

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