The Canadian Economy’s “Me-cession”: When Collective Growth Masks Individual Struggles

Despite avoiding a technical recession, the Canadian economy is experiencing a peculiar phenomenon dubbed the “me-cession.” While collective economic measures like GDP and spending are still expanding, many Canadians are feeling the pinch and restricting their individual spending, behaving as if in a recession.

This divergence between aggregate and per capita economic indicators is largely driven by Canada’s record population growth. The influx of new residents has boosted overall demand and economic activity, even as individual households and businesses remain cautious and struggle to get ahead.

“Collectively, we are spending more and pushing economic activity higher but, individually, we are restricting purchases and behaving as if we are in a recession,” explains Charles St-Arnaud, chief economist at Alberta Central.

The “me-cession” is particularly acute in Alberta, which has seen the highest population growth in the country. However, wages and incomes in the province have failed to keep pace, while Albertans are among the most indebted households.

“If you look at the individual person and household, they’re actually not doing great,” says Alicia Planincic, an economist at the Business Council of Alberta.

Nationally, 46% of Canadians say they’re losing sleep over their finances, with many dining out less, delaying large purchases, or putting off a move to cut costs.

The resilience of the labor market, characterized by a lack of mass layoffs, has prevented the “me-cession” from turning into a full-blown recession so far. However, this could change if the labor market deteriorates or as mortgage renewals at higher rates put renewed pressure on highly indebted households.

Moreover, the expected slowdown in population growth due to limits on non-permanent residents will remove a key support for the economy in the coming years.

In summary, while the Canadian economy continues to expand collectively, many individuals are struggling to get ahead. This “me-cession” highlights the need to look beyond aggregate measures and address the challenges faced by households and businesses at the ground level.

The concept of a “me-cession” differs from a traditional recession in several key ways:

1. Economic growth vs individual struggle: While the overall economy may still be growing, many individuals are feeling the pinch and struggling to get ahead financially. There is a divergence between aggregate economic measures like GDP and the personal financial situations of households.

2. Spending patterns: In a traditional recession, both collective and individual spending typically decline. In a “me-cession”, while collective spending is still increasing, individuals are restricting their spending and behaving as if in a recession. 

3. Unemployment: Recessions are often characterized by a surge in unemployment. However, in the current “me-cession”, the labor market has remained relatively resilient, with no major layoffs so far. The rise in unemployment has been more gradual.

4. Driving factors: The “me-cession” is largely driven by Canada’s record population growth, which has boosted overall economic activity. However, wages and incomes have failed to keep pace, especially in high-growth regions like Alberta.

5. Potential triggers: While a traditional recession may be triggered by factors like a financial crisis or a collapse in consumer confidence, a “me-cession” could turn into a full-blown recession if the labor market deteriorates or if highly indebted households face renewed pressure from mortgage renewals at higher rates.

In summary, while the Canadian economy continues to expand overall, many individuals are struggling to get ahead financially. This divergence between aggregate and individual economic indicators is the hallmark of the current “me-cession”.