Not feeling the effects of the growing economy? Welcome to the ‘vibecession’

A new term is making the rounds to describe the current disconnect between economic forecasts and personal sentiment.

Welcome to Canada’s “vibecession.”

“It really just means that people’s experience of the economy is worse than certain headline statistics might suggest,” University of Calgary economist Trevor Tombe said. “Looking at aggregates is important, but no single data point — whether it’s some labour market statistic or headline inflation or GDP growth — tells the full story about how people experience the economy.“

The separation of data and feeling is growing in Canada. 

Last week, numbers from Statistics Canada showed the economy grew by one per cent in the third quarter of 2024. And the inflation rate is now hovering around two per cent, which is actually in line with the Bank of Canada’s target. 

So yes: post-pandemic price growth has slowed, but the cost of important things like groceries and housing are still sky-high, and wage growth hasn’t kept up in years. 

Economists admit that overall headlines statistics no longer tell the entire story for a large chunk of society. 

“Our living standards have just stagnated for many years,” Tombe said. “Prices rose a lot, and if your wages are growing three or four per cent compared to current inflation, it’s still going to take several years to recover the lost purchasing power.”

Booming buzz word

Author and economic commentator Kyla Scanlon coined the term “vibecession” in 2022. 

She anticipates its appropriateness — and its usage — will only continue to grow. 

“But it’s not that your vibes are off,” she assured CTV News from Los Angeles. “It’s that our economic data probably isn’t capturing how you’re actually feeling about things.”

“It’s really hard to talk about this stuff because the economy is so personal, and that’s part of the issue. People are living extraordinarily different lives. Your neighbour could have a totally different economic experience and a different inflation rate, a different experience in the labour market, a different experience with economic growth.”

So, what’s the answer? How do policy makers pull exorbitant costs further down to fall in line with public perception without really hurting the economy? 

Scanlon says it’s not temporary tax breaks, like the one proposed by Canada’s federal government last month. 

In a press conference announcing the move, the country’s deputy PM used the term Scanlon phrased. 

She believes it was maybe a little misguided. 

“The thing that leaders really have to message is like, “we understand your issues with housing, we understand your issues with the labour market, we understand your issues with inflation and we’re doing everything we can to try to fix that.”

Tombe agrees. 

“Governments need to prioritize thinking about ways of boosting productivity and economic growth. And right now, I think it’s fair to say that most governments in Canada are not focused on it.”