Why aren’t Canadians feeling good about the economy?

Since the start of the pandemic, governments across Canada have rolled out more income support programs than any time since the second world war. At the same time the Canadian economy has not only rebounded it has also surpassed pre-pandemic levels of growth. Yet Ipsos Canadian Context data show that since October 2020, the percentage of Canadians who think that our system is corrupt has increased from 57% to 64%. Trust in other Canadians is down 14%, and trust in the system is down 15%.

Given this, one might assume that many Canadians feel they are on the outside looking in at a growing economy, low unemployment, and high corporate profits, and feeling like other Canadians are getting ahead while they get left behind. There is data to support this, but there may be something else happening as well. 

The economic pessimism Canadians are feeling is at least in part due to a growing disconnect between what our institutions and leaders focus on, i.e., macro-economic evidence such as job and GDP growth - and what the public’s perception is of their personal current and future economic opportunities.

As the chart below shows, the pandemic, the economic slump, the government bailout, and the subsequent economic rebound have combined to turn the public’s assessment of what matters when they think about the economy on its head.

Pre-pandemic, broader confidence in the economy – belief that the economy is performing well and will continue to improve - was running ahead of personal confidence – belief that the individual is doing well and will continue to do well economically. This makes sense. As individuals we are all part of the economy. If the economic tide is rising or falling, we would expect that so too would most of our personal opportunities.

However, when the pandemic happened and the economy shut down, we saw a much steeper decline in overall economic confidence than we did for our personal economic confidence. We felt at an individual level that we would personally weather the storm better than most other people.

Our view of our own personal prospects, while down, have remained above our expectations for the broader economy. This might be explained by the government injections of cash or forced savings from the inability to spend during the lock downs. However, our assessment of our personal economic strengths has held consistently higher, even as we move further away from the start of the pandemic and into a phase of increased concern regarding the rising cost of living.

This flip in public views is not proving to be consistent in all the countries Ipsos monitors, but in Canada it does have some implications for business and public sector leaders who have seen levels of trust and confidence in them erode over the last 20 or so months. With Canadians’ confidence in their own economic prospects and those of the country trending down in the first quarter of 2022, Canadian leaders should be preoccupied with shoring up both of these trend lines.

Leaders need to begin to engage Canadians on the issues that matter to them. Those issues are having enough money to pay the bills, enough money to buy a house, and a clear personal economic path for the future. Economic conversations need to link these issues with the broader macro-economic issues. Leaders not making this link and who are proclaiming that Canada has emerged from the pandemic stronger than ever while announcing new spending programs and acting as if things are continuing to improve are out of step with the views of most Canadians. 

If economic confidence (both overall and personal) continues to trend down, we all need to recognize that recent social unrest such as the trucker protests are about much more than mask mandates; they were a symptom of a much bigger problem. Almost fifty percent (48%) of Canadians said that the protests wouldn’t have taken place if people weren’t feeling such a high level of economic frustration, while 46% said that while they may not agree with everything the protestors said, their frustration was legitimate. The growing disconnect between leaders and citizens has the potential to cause further disruption, in the form of protests, populist voting behaviour and in an increasingly local rather than national perspective where Canadians choose “me over we” when making purchases or assessing public policies.

Looking ahead consumer confidence is likely to become an even bigger factor in understanding the future direction of the economy. Concerns over interest rates and the cost of living started rising in mid- 2021 and have grown steadily into 2022. Each month’s inflation only serves to confirm what Canadians were telling us all along. Despite their concerns they are still spending. Perhaps they are spending the last of their pandemic savings or perhaps they are anticipating greater income support from governments in the future to help them maintain their standards of living.

It seems unlikely that the level of spending will continue because despite the rosy macro-economic indicators the mood of the public has shifted to a growing fear that things are about to get worse before they get better. What seems more certain, is that we are likely to see further declines in trust of our institutions and a widening of the disconnect between Canadians and their corporate and political leaders if Canadians continue to hear only the “good news” about GDP growth, record-low unemployment, and corporate profits.