The Economy Is Booming. Why Do Many Americans Think We're in a Recession? - New York Magazine | Canada News Media
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The Economy Is Booming. Why Do Many Americans Think We're in a Recession? – New York Magazine

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This is what a depression looks like.
Photo: Bettmann Archive/Getty Images

The bad news on the U.S. economy is we’re seeing the highest levels of price inflation in 40 years or so. The silver lining is the economy is growing at a steady clip (7 percent on an annual basis in the last quarter of 2021) and unemployment is low (4 percent in January). As the U.S. Department of Labor boastfully but accurately put it in commentary on the January jobs report:

The new data shows that the economy added a record 6.6 million jobs since President Biden took office and an average of 541,000 new jobs per month over the last three months. With labor force participation up over the year and long-term unemployment continuing to decline, America is getting back to work.

So this poll finding from USA Today and Suffolk University is kind of … surprising: “a 51% majority of those surveyed say the economy is in a recession or a depression, the gloomiest outlook in six years.”

According to the Federal Reserve Bank of San Francisco, a recession is defined as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.” All of those indicators are currently positive. A depression is defined as “a more severe version of a recession.” The Great Depression of the 1930s was a sustained period of economic stagnation, falling prices, and very high unemployment.

You don’t have to be a student of economics or follow economic indicators closely to understand that inflation and recession don’t usually coincide (except during the 1970s experience of “stagflation,” which is not happening at present). Most Americans can remember all the way back to May 2020, when the unemployment rate was 13.2 percent, more that triple what it is today. And today’s ubiquitous “Help Wanted” signs are not something you saw in 2020 — or, for that matter, in October 2009, when unemployment maxed out at 10 percent. You know, during the Great Recession.

It’s possible an awful lot of people think recession or depression just means economic trouble even if the problem at hand — inflation — is the opposite of, well, recession or depression. Or maybe, as The Atlantic’s Annie Lowrey suggests, something more fundamental is going on:

The economy is booming and people feel terrible. This strange situation is born of strong partisanship, complicated economic factors, changes in voter ideology, and the broader state of the world …

The gap between Democrats’ and Republicans’ consumer expectations rose from roughly 20 to 25 points during George W. Bush’s and Barack Obama’s presidencies to more than 50 points during the Donald Trump and Joe Biden years.

But it’s not just Republicans feeling bad about the economy, Lowrey notes:

The chaotic withdrawal from Afghanistan, the Delta and Omicron coronavirus waves, the sputtering of the Democrats’ election-reform and social-infrastructure bills, and, perhaps most of all, the false assurance that inflation would be “temporary” — all of those factors led Democrats and moderates to turn on Biden. “There’s no way for Biden, and Democrats generally, to offer a counternarrative that’s going to be as attractive as the bad news,” [Vanderbilt University political scientist John] Sides told me. “It’s been very hard for Democrats to feel optimistic.”

Americans may soon get a refresher course on what a real recession feels like if the Federal Reserve Board chooses to jack up interest rates to fight inflation, which is likely to slow down economic growth and boost unemployment. Maybe the Fed will get it just right and the economy will cool down without stalling out, or maybe the worst will happen and a deep recession will arrive.

Biden plans to address this economic malaise in Tuesday’s State of the Union Address, and reassuring the public about the economy as it exists today and what it might look like a few months down the road will be a tough task. If there was ever a time when Uncle Joe needed to project a calm and steady hand on the tiller, it’s now, whether it’s in dealing with the pandemic, a suddenly very dangerous world, or an economy that feels bad even in the ways it should feel good.

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Economy

Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

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OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.

Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.

Business, building and support services saw the largest gain in employment.

Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.

Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.

Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.

Friday’s report also shed some light on the financial health of households.

According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.

That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.

People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.

That compares with just under a quarter of those living in an owned home by a household member.

Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.

That compares with about three in 10 more established immigrants and one in four of people born in Canada.

This report by The Canadian Press was first published Nov. 8, 2024.

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Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

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The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.

The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.

CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.

This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.

While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.

Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.

The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.

This report by The Canadian Press was first published Nov. 7, 2024.

Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.

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Trump’s victory sparks concerns over ripple effect on Canadian economy

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As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.

Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.

A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.

More than 77 per cent of Canadian exports go to the U.S.

Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.

“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.

“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”

American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.

It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.

“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.

“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”

A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.

Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.

“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.

Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.

With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”

“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.

“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”

This report by The Canadian Press was first published Nov. 6, 2024.

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