Is there such a thing as a “good economy,” and if there is, what does it look like?
Over the last few months, economists and pundits have been trying to figure out why people believe the economy is bad when it is, in fact, good.
It’s mostly discussed in the United States, but Canadians are wrapped up in much the same economy and culture.
Let’s look at the situation on the ground that suggests the economy is doing well.
Unemployment remains low, despite rising interest rates and the recent bout of high inflation. Wages are rising. People making low-wage jobs in North America saw stronger wage growth than average.
Meanwhile, inflation has eased, if not yet gone down to the target levels we were expecting.
This is about as good a soft landing as we were ever going to get. Most experts were predicting a bad recession. So yes, the economy is good.
So why do so many people think it’s awful?
There are two answers.
The quick answer is that a lot of the stuff we pay for on a frequent basis got a lot more expensive since 2020.
Everyone whose mortgage has re-set in the last couple years is paying more – maybe a lot more. Renters are even worse off. And every time you buy groceries, you’re reminded that stores and food producers simply passed along every bit of inflation straight to the consumer.
So the short answer is that yes, most of us have jobs, and most of us are getting raises, but all that income is being eaten up. We’re not worse off, but we’re not much better off either, and having an economist tell you how good you have it when chicken breasts are now over $12 feels kind of insulting.
The long answer to this question is that most people working now do not really remember a time when the economy felt stable.
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Good, sure, there’ve been good times.
But I’m middle aged. When I was a child, my parents lived through the worst recession in B.C.’s history. There was another nasty one a decade later, when I was starting high school. Then there was the Asian economic crisis, the dotcom crash, the Great Recession, and COVID-19.
Forget good! I would trade good for stability, or even the illusion of stability.
No one under the age of 50 remembers a time when most people were confident that the economy would keep getting better for everyone. That dream died while we were still in elementary school.
Why do most people think the economy is bad? Because we know that a “good economy” is only a brief interlude between bad ones. Because even in the good years, the cost of housing will outpace any increase in our wages. Because we know the next generation is going to be worse off than we are.
A good economy is one that promises long-term stability. It’s not about what you can buy now, it’s about not worrying about how many shocks we’ll have in the next 10 years. Until we get there, what good does a good economy do any of us?