Feeling pinched despite a strong economy? Welcome to the 'vibecession'
Term meant to reflect people’s negative economic perceptions when statistics tell a different story
Picture this: groceries feel more expensive than ever. You can't afford a house but rent is soaring, too. Saving for retirement feels like a pipe dream.
But despite the bleak outlook, the economy is actually doing alright. The inflation rate is hovering around two per cent — in line with the Bank of Canada's target. Economic growth is somewhat low — at one per cent in the third quarter — but it's still above recession territory.
Welcome to the "vibecession," a term that refers to a disconnect between economic data and how consumers feel.
The word got a boost this week after Deputy Prime Minister Chrystia Freeland used it when talking about the federal government's GST holiday.
"One of the positive impacts of this measure is to help Canadians get past that vibecession. Because how Canadians feel really does have a real economic impact," Freeland said at a news conference on Nov. 25.
The move will pause tax collection on a range of basic necessities and consumer goods from Dec. 14 through Feb. 15 of next year.
But Kyla Scanlon, an economist and author of In This Economy? who coined the term, is glad the word is catching on — says Freeland's use of it isn't quite right.
"When you just say, 'Hey, everybody … just feel a little bit better. It'll be OK,' like, it just doesn't work," Scanlon told Day 6 host Brent Bambury.
"I think it will help people provide some relief, I'm sure. But I think the moment that you maybe take it away again … people are going to be like, 'I'm still struggling.'"
How useful is the term?
Scanlon first used the word "vibecession" in a 2022 newsletter after she noticed that core economic indicators were doing alright, but her 200,000-plus followers on TikTok were telling her they were feeling stretched.
She thinks it can help explain how people's personal experiences aren't always reflected in the data. If inflation goes down, for example, grocery prices don't always follow.
"The economy is an extraordinarily personal experience. But we talk about it in terms of averages, right?" she said.
She hopes the word might help governments and economists find data points that more accurately reflect consumer sentiment.
Not all economists think we're in a vibecession
According to certain numbers, Canada isn't actually in a vibecession, says Jim Stanford, economist and director with the research organization Centre for Future Work — otherwise they wouldn't be spending so much.
"If indeed people were that upset and worried about the economy, they wouldn't be out there spending as strongly as they are right now," he said.
Improvements in consumer confidence, consumer spending and disposable income all paint a more optimistic picture of Canadian's financial outlook, he says.
Stanford acknowledges that Canadians are still "trying to make their living in a hard, unequal economy," especially in the middle of a housing crisis.
But he says the tough economic times of the early pandemic may still linger in people's memories, and it might just take time for their perceptions to catch up with the data.
"To some extent, it could just be, you know, the trauma and the fatigue of people who've been through a pandemic, a temporary rise in inflation, high interest rates, and are feeling angry and bruised by it all," Stanford said.
Vibes affect politics
Scanlon isn't the only one who objects to Freeland's use of the word vibecession.
Opposition Leader Pierre Poilievre, criticized its use on social media and in Question Period.
Stanford says the GST holiday is motivated more by politics than by economics, but admits that it might give consumer spending an extra boost.
"I don't think it would make much difference economically. It might make some difference politically. We'll see how it plays out," Stanford said.
Stanford says it will take time and "a bit of patience" for people to feel economic improvements like wage growth and falling inflation. That can make it hard for governments trying to put a dent in a vibecession.
"The problem for a politician facing an election is they don't have time," she said.
Stanford adds that negative economic outlooks can have big political impacts — and the U.S. election was a prime example.
Despite a lot of "grassroots anger" in the U.S., Stanford says folks had more money in their pockets than in previous years, and were spending it.
"So there was no vibecession in consumer spending in the U.S., but there was an angry mood. And in the end that ended up being politically quite important," Stanford said.
Exit polls showed that 70 per cent of people who voted for Trump said the economy was doing poorly, while only seven per cent of people who voted for Harris said the same.
Scanlon agrees — the Democrats' approach to point to the U.S.'s overall optimistic economic picture while avoiding negative perceptions was a big failure.
"[They] risked the entire election. Harris lost," Scanlon said.
Around the world, incumbent governments have been overthrown in dozens of major elections this year, driven in large part by economic unease.
Stanford hopes that a better, less politicized understanding of where people's negative feelings are coming from might help people see that governments aren't entirely to blame for economic factors.
"People are obviously open to the idea that we need to 'throw the bastards out,'" said Stanford. "It absolutely will not solve everything. Housing will still be very expensive and inequality will still be very high."
ABOUT THE AUTHOR
Interview with Kyla Scanlon produced by Arman Aghbali
