From the Fraser Institute

By Jake Fuss and Grady Munro

In light of recent comments from federal Finance Minister Chrystia Freeland about the supposed “vibecession” infecting the brains of Canadians, it’s time to set the record straight. It’s not just that people don’t feel good about the economy, the economic wellbeing of Canadians has been declining for years.

Firstly, it’s true that the overall economy is growing and inflation has been brought back down to the Bank of Canada’s 2 per cent target. While these are positive signs—especially considering the alternative of a shrinking overall economy and rising inflation—they do not necessarily mean that Canadians are better off.

Gross domestic product (GDP)—the value of all goods and services produced in the economy—is the most widely used measure of overall economic prosperity. But measuring it in “aggregate” doesn’t tell us about the individual living standards of Canadians. To gauge how individual Canadians are actually doing, we measure GDP per person (and adjust for inflation). And on this measure, the data tell a different story.

From the middle of 2019 to the end of 2023, Canada experienced one of the worst declines in inflation-adjusted GDP per person of the last 40 years. According to new data from Statistics Canada, this decline in living standards has continued for most of 2024, and as of September 2024, GDP per person ($58,601) was 2.2 per cent lower than in June 2019 ($59,905). Simply put, Canadians have suffered a marked decline in living standards over five years.

And while GDP per person is a broad measure of individual prosperity, other measures tell a similar story.

According to a recent study published by the Fraser Institute, median earnings (i.e. wages and salaries) of workers were lower in every Canadian province than in every U.S. state in 2022 (the latest year of available data). In other words, workers in Canada’s highest-earning province (Alberta) earned less than workers in the lower-earning U.S. states such as Louisiana and Mississippi.

Moreover, Canada’s private-sector employment has stagnated. From 2019 to 2023 (the latest year of available data), employment in the private sector (including self-employment) grew by 3.6 per cent compared to 13.0 per cent in the government sector. And that’s a problem. The private sector pays for the government sector, primarily through taxes. While a growing private sector helps drive wealth-creation in the economy, a growing government sector extracts that wealth and redistributes it elsewhere or even inhibits that wealth-creation in the first place.

Despite data showing that private-sector employment and living standards have stagnated and/or declined for years, the Trudeau government insists that everything is fine and Canadians just “feel” worse off. Clearly, this government is out of touch with economic reality.

From the Fraser Institute

By Grady Munro

In June 2019, inflation-adjusted per-person GDP was $59,905 compared to $58,601 in September 2024, a decline of 2.2 per cent. And while per-person GDP has ebbed and flowed during this decline, the third quarter of 2024 marks the sixth consecutive quarter that living standards have fallen in Canada.

During a recent press conference about the Trudeau government’s plan to send $250 cheques to many Canadians and suspend the GST on certain goods and services for two months, federal Finance Minister Chrystia Freeland said Canadians are experiencing a “vibecession,” which is creating negative feelings about the economy despite “really positive economic news.” According to Freeland, these two proposals, which will cost billions, will “help Canadians get past that vibecession.”

But in reality, the economic woes of Canadians are real, and new data from Statistics Canada show that Canadian living standards are declining.

Let’s look at the numbers. From July to September of 2024, after adjusting for inflation, the Canadian economy (as measured by GDP) grew by 0.3 per cent yet per-person GDP (an indicator of living standards and incomes) actually fell by 0.4 per cent.

How can the economy grow while living standards decline?

Because Canada’s rapid population growth, fuelled by high levels of immigration, means the overall economy has increased in size but per-person GDP has not. And during the same three-month period (July to September), Canada’s population increased by 0.6 per cent (or 250,229 people), outpacing the rate of economic growth.

Not merely a one-off, this continues a historic decline in Canadian living standards over the last five years. In June 2019, inflation-adjusted per-person GDP was $59,905 compared to $58,601 in September 2024, a decline of 2.2 per cent. And while per-person GDP has ebbed and flowed during this decline, the third quarter of 2024 marks the sixth consecutive quarter that living standards have fallen in Canada.

Last week, the House of Commons approved the government’s plan to temporarily suspend the GST on select items from December 14 to February 15, at an estimated cost of $1.6 billion (the legislation now goes to the Senate for approval). The government has delayed the “$250 cheques” plan to potentially accommodate NDP demands to expand eligibility to include seniors (the original proposal would have sent cheques to an estimated 18.7 million Canadians at a cost of $4.7 billion).

Neither one of these proposals will incentivize Canadians to work and invest, and therefore these proposals won’t help raise living standards. To help drive economic growth, create jobs and provide more economic opportunities for workers across the income spectrum, the federal government should reduce the overall tax burden on workers and businesses, and make Canada a more attractive place to work and invest.

Despite any claims of a “vibecession,” Canadians remain mired in an actual recession in their standard of living. Minister Freeland’s comments once again prove that this government is disconnected from the reality many Canadians face. It’s not just bad vibes—data shows Canadians are actually worse off today than they were in 2019.

Grady Munro

Policy Analyst, Fraser Institute