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Economy

America’s Mixed-Signals Economy

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1 year ago

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The U.S. economy is actually doing pretty well. But for working people navigating mixed messages and high prices, the dominant feeling has been meh.

Feeling Iffy

“US. ECONOMY ADDS 400,000 JOBS IN MONTH: REPORT SPURS FEARS, declaimed the Washington Post last February … APRIL JOB GROWTH EASED DECISIVELY, STIRRING CONCERN, the New York Times warned … By June the Journal was warning, SOFT LANDING MAY BE THREATENED BY CONSUMERS.”

You would be forgiven for assuming that the above headlines are plucked from this year’s newspapers, but they’re actually more than 30 years old. These were gathered—and skewered—in a 1989 article in The New Republic titled “The Sky Is Always Falling,” in which Gregg Easterbrook argued that newspapers frame all economic news, even seemingly positive developments (job growth, for example), as bad news.

A similar tendency appears in many of today’s reports on the economy too. To be fair, the sky does often appear to be falling, and sometimes for good reason: A lot of the recent economic news is self-evidently bad. But although inflation has been a beast, the economy is actually doing very well by some metrics. Unemployment is low! America has added jobs 31 months in a row! Consumer spending is high! Many economists and Fed officials, until recently, have been reluctant to cheer for these apparent wins, fearing that a tight labor market and strong demand would lead inflation to persist. (When it comes to economic data, it seems, all signs can turn out to be bad signs in retrospect.)

Consumers, too, have been feeling meh for some time now. In June 2022, consumer sentiment reached its all-time historic low since the University of Michigan began measuring it, more than 50 years ago. And a New York Times/Siena poll released this month found that just 20 percent of Americans think the economy is good or excellent. But spirits seem to be lifting: Data from the University of Michigan Surveys of Consumers indicate that consumer sentiment has trended upward this summer and is now closer to the average outlook during a standard year for the U.S. economy (if still not quite there). This metric matters because when consumers feel confident, they spend more on goods and services—and, in turn, serve as the engine of the economy, Joanne Hsu, the director and chief economist of the University of Michigan Surveys of Consumers, told me.

Americans’ lukewarm feelings about the economy over the past year make sense in many ways. Inflation has been higher than it’s been in decades, hitting many younger working people for the first time. And until late this spring, hourly wages had been outpaced by inflation for two years. Consumers feel poorer. “As an economist, I would say [the economy] is pretty good, because I’m optimistic that there is going to be further real-wage growth,” Darren Grant, an economist who has studied consumer confidence, told me. But, he added, as a working person who has seen his purchasing power diminished by inflation, he understands why many consumers don’t feel that same optimism. (It’s worth noting that average real wages have crept up in recent months, and many workers did see gains last year—especially those who switched jobs.)

Perception also plays a role in consumers’ iffy views on the economy; as my colleague Annie Lowrey wrote last month, “Consumers tend not to notice when things get better as opposed to worse.” Further exacerbating negative perceptions is what she has called the Wrong-Apartment Problem, or the fact that so many people can’t afford to live where they want to live, which can strengthen the sense that the economy is in a bad place. And political leanings can also color how people feel about the way things are going (anti-Biden Americans might not be enthusiastic to embrace “Bidenomics”).

The information environment we live in is not conducive to fostering great vibes about, well, anything, but especially about the economy. For more than a year, a drumbeat of headlines have warned that a recession is imminent. And consumers are inundated with information—not always accurate—on social media. Nearly half of Americans said earlier this summer that they thought the country was in a recession or would be in one soon. Nearly half! “The discourse around the economy is very different than it was 40-plus years ago,” Hsu told me. “The share of people saying they’d heard bad news about inflation was much higher over the last year than it was in the ’70s and ’80s,” when inflation was higher. Though the news environment is not necessarily the cause of recent negative feelings about the economy, she said, it likely reinforces them.

The story of the economy right now is one of mixed messages and mixed reactions. Grant explained that we’re in a “middle zone,” where people are watching some economic measures improve as wages catch up. Inflation is still not quite where the Fed wants it to be. But, hovering around 3.2 percent, it’s much lower than it was last summer, when it peaked above 9 percent. And in the second quarter of the year, the economy grew by 2.4 percent, surpassing expectations. What the Fed and many economists now hope to see is a growing, but not rollicking, economy. So far, it seems that the U.S. has managed to achieve lower inflation without a ton of people losing jobs. That’s legitimately good news.

And, as the preliminary data show, consumers are recognizing that. “The public has a pretty reasonable sense of what’s going on in the economy,” Grant said. “We should give them some credit.”

Evening Read

illustration of a man and a woman in an office together
GraphicaArtis / Getty

The Bizarre Relationship of a ‘Work Wife’ and a ‘Work Husband’

By Stephanie H. Murray

It started out as a fairly typical office friendship: You ate lunch together and joked around during breaks. Maybe you bonded over a shared affinity for escape rooms (or board games or birding or some other slightly weird hobby). Over time, you became fluent in the nuances of each other’s workplace beefs. By now, you vent to each other so regularly that the routine frustrations of professional life have spawned a carousel of inside jokes that leavens the day-to-day. You chat about your lives outside work too. But a lot of times, you don’t have to talk at all; if you need to be rescued from a conversation with an overbearing co-worker, a pointed glance will do. You aren’t Jim and Pam, because there isn’t anything romantic between you, but you can kind of see why people might suspect there is.

Read the full article.

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Economy

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

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2 days ago

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September 10, 2024

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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.

The Canadian Press. All rights reserved.

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Economy

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

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2 days ago

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September 10, 2024

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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.

The Canadian Press. All rights reserved.

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Nova Scotia bill would kick-start offshore wind industry without approval from Ottawa

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2 days ago

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September 10, 2024

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HALIFAX – The Nova Scotia government has introduced a bill that would kick-start the province’s offshore wind industry without federal approval.

Natural Resources Minister Tory Rushton says amendments within a new omnibus bill introduced today will help ensure Nova Scotia meets its goal of launching a first call for offshore wind bids next year.

The province wants to offer project licences by 2030 to develop a total of five gigawatts of power from offshore wind.

Rushton says normally the province would wait for the federal government to adopt legislation establishing a wind industry off Canada’s East Coast, but that process has been “progressing slowly.”

Federal legislation that would enable the development of offshore wind farms in Nova Scotia and Newfoundland and Labrador has passed through the first and second reading in the Senate, and is currently under consideration in committee.

Rushton says the Nova Scotia bill mirrors the federal legislation and would prevent the province’s offshore wind industry from being held up in Ottawa.

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

The Canadian Press. All rights reserved.

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