Link between personal financial strain and powerlessness depends on people’ perceptions of economy
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The debate about perceptions of the economy has reached a fever pitch lately.
Some argue that perceptions don’t align with reality, that pessimism about the economy is disconnected from objective conditions. United States Treasury Secretary Janet Yellen labelled these negative sentiments “unwarranted.” Likewise, Claudia Sahm, a former U.S. Federal Reserve economist, described “a toxic brew of bad events” that has fuelled “amped-up pessimism.”
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Others push back against the “vibecession,” arguing the negativity is justified because many people are struggling.
Either way, the bad vibes are creating headwinds for U.S. President Joe Biden — and fodder for his opponents. Some strategists warn that doubling down on the “you’re better off than you think” message is politically unwise. The advice: Negative sentiments are real — even if they might be softening — so don’t try to vanquish them with counter evidence. The customer is always right. If they say the coffee is too cold, it’s too cold even if you’ve served it at a perfect 52 C.
Why have the bad vibes been so sticky? Could pessimism about the economy be psychologically protective when personal finances feel strained? To find out, we fielded a national survey of 2,500 Americans in November 2023 with the help of research firm YouGov PLC. We call it the MESSI study: Measuring Employment Sentiments and Social Inequality.
First, to measure personal financial strain, our survey asked Americans how often they struggle to pay their bills, how often they don’t have enough money to buy basic necessities and whether their finances come up short each month in a chronic struggle to make ends meet.
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Research has consistently shown there is a strong link between personal financial strain and an important dimension of alienation: the sense of powerlessness. Our study replicates that pattern. People who experience economic hardship tend to feel a low sense of personal control, feel helpless in dealing with problems and generally feel pushed around in life.
But there’s a twist. The strength of that link between personal financial strain and powerlessness depends on people’ perceptions of the economy, although not in the way you might think.
To measure perceptions of the economy, we adopted the question from the U.S. Federal Reserve’s 2022 Survey of Household Economics and Decisionmaking: “In this country, how would you rate economic conditions today?” We compared people who reported “poor” or “fair” (a bad economy) to those who reported “good” or “excellent” (a good economy).
Common sense suggests that perceiving a bad economy would exacerbate the powerlessness that comes with personal financial woes, perhaps because it tarnishes the U.S.’s image as the “land of opportunity,” thereby undermining the hope that better days lie ahead.
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But we found the exact opposite. Perceiving a bad economy diminishes the powerlessness that is typically associated with personal financial stress. That is, the bad vibes appear to be protective.
One interpretation of this counterintuitive pattern is that pessimism about the economy functions as a stress buffer because it’s a proxy for the “we’re all in the same boat” idea, or that personal financial turbulence isn’t your fault, but the result of choppy air in the broader economy.
Here’s another surprise: This isn’t just an American phenomenon. We found almost identical patterns in Canada. Partnering with research firm Angus Reid Group, we fielded a national survey of 2,500 Canadians in October 2023 that asked the same questions in the MESSI. We call this the Canadian Quality of Work and Economic Life Study (C-QWELS).
Replicating our American findings, the relationship between personal financial strain and powerlessness is weaker among Canadians who perceive a bad economy. In other words, the benefit of bad vibes generalizes beyond Uncle Sam’s borders to the Great White North.
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These mirror patterns imply a general social-psychological dynamic could be at work. People cope with the powerlessness of financial strain when they frame it as part of an external problem.
Sure, you might find some comfort in the belief that the economy’s performance is lacklustre, especially if your own personal financial health isn’t great. But is there any downside to thinking things are worse than they really are? Probably. Acting on these negative sentiments might lead to unnecessarily jettisoned policies, leaders and cups of coffee that were otherwise, well, relatively fine.
Scott Schieman is a Canada Research Chair and professor in the Sociology Department at the University of Toronto. Alexander Wilson and Jiarui Liang are graduate students in the Sociology Department at the University of Toronto.
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OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
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