Link between personal financial strain and powerlessness depends on people’ perceptions of economy
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.
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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 – 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.
The Canadian Press. All rights reserved.
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.
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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