Weird economic vibes

Good morning. Does anyone else follow the Celebrity Jet Tracker account on Twitter? It tweets every time a celebrity takes off from their private plane and reports the amount of carbon emissions each trip emits. The tracker shines a light on the fact that the rich often have the biggest carbon footprints on our planet.

In this edition:💵 Recession rumours🏠 Going 50-50 on a house

— Vindhya Kolluru, Editor

ECONOMY

What kind of strange economic simulation are we living in?

With a global pandemic throwing a wrench in their lives, younger millennials and Gen Z’ers have had a tough go at adulthood. Now, a murky economy and possible recession could make things a lot more stressful.

Let’s start with the basics. What is a recession? Generally, we’re in recession territory when the economy shrinks for two quarters in a row, as measured by gross domestic product (GDP), a broad measure of a nation’s economic output. We say generally because the official definition of a recession has stirred up some serious debate.

• In Canada, the Minister of Finance and a bunch of smart economists from the Bank of Canada make the final call on whether we’re in a recession. They evaluate GDP but also other economic indicators, like the job market, if and when it’s time to make it official.

But here’s one thing we can agree on: Recessions — like Instagram’s pivot to TikTok (the things we’d do to return to a Valencia-filtered feed) — are a complete vibe killer. Economic downturns make it difficult to build your financial future, hard to find or hold a job down and make the cost of borrowing for things like mortgages or car loans more pricey.

If we look at GDP alone, Canada seems to be in the clear…for now (dun dun dun). On Friday, Statistics Canada said our GDP remained flat in May, after expanding 0.3% in April. RBC became the first Canadian bank to predict we're headed for a recession sometime in 2023. Other economists agree.

With that said, experts think now is a good time as ever to take stock of your financial health. We’ve rounded up their top tips on how to prepare for a recession — whether it comes or not. (This isn't financial advice, however, so we recommend consulting a professional to assess your situation.)

• Hit the books: Personal finance educator Kelley Keehn suggests younger Canadians upskill by taking courses and earning certifications. This, according to Keehn, will make your life easier in case you need to pivot in the job market.

• Make it rain: Consider holding at least three to six months of your income in a rainy day fund. If that sounds daunting, financial planner Zainab Williams suggests people start by matching their largest monthly expense, like rent.

• Start on a high note: Credit cards, personal loans and payday loans are some sources of high-interest debt. Experts recommend tackling your high-interest debt so that you aren’t shouldering the effects of higher interest payments on your borrowed money.

• Here comes the avocado toast spiel lol: Experts say it’s time to take a hard look at your spending habits and consider where you can cut back. Even small changes can add up, such as reevaluating your monthly subscriptions or hacking your way to savings while ordering takeout.

• Riding in my Fiat, you really have to see it: Because now’s the time to keep your compact. Experts recommend holding off on making major financial decisions like splurging on a new whip or heck, even concerts. With interest rates on the rise, major purchases that require you to borrow money risk wearing your finances thin.

The bottom line: We're not in a recession yet, but around 60 per cent of Canadians seem to think we are. It shows that rising prices and a gloomy economy are top of mind for many folks. Know that if you're in that boat, you're not alone. Experts shared their tips for managing financial stress, one step at a time, with the New York Times.

— Jodi Anderson

On our radar

• The founder and CEO of Jazzercise, Judi Sheppard Missett, credits TikTok and Instagram with helping the decades-old fitness brand reach Gen Z.

• Clearco, the e-commerce merchant financier co-founded by Michele Romanow, let go of a quarter of its staff (around 125 workers) last week. A number of Canadian companies, including Shopify and Wealthsimple, have reduced headcount amid a broader economic downturn.

• Guava, founded by Kelly Ifill, raised a US$2.4 million pre-seed round. The New York-based digital banking platform aims to narrow the wealth gap by providing financial services to Black entrepreneurs.

• Gaby Goldberg is not your typical 23-year-old. After graduating from Stanford in 2021, she became one of a handful of Gen Z investors in the cryptocurrency space. Check out this profile to learn about Goldberg and how starting a Twitter account right before the pandemic jumpstarted her career in investing.

REAL ESTATE

Rising housing prices are forcing Canadians to get creative

To cool down the housing market, estimates show that we need an additional 3.5 million affordable housing units by 2030. But who can wait for that long? With so many Canadians struggling to meet this basic need, we are seeing a rise (and a resurgence) in novel housing arrangements. These include:

• Multi-generational homes: There are now around one million multi-generational homes. These households include three or more generations, and their increasing popularity, which has grown by 45% between 2001 and 2021, could be in response to rising prices, cultural preference or the (sometimes) added bonus of childcare.

• In-law suites and garden suites: These are typically a secondary suite within a home, usually a basement, or a small cabin on the same property used for rental income from a tenant or for family. Changes to zoning and municipal regulation to allow for more suites have often been met by organized NIMBYism.

• Splitting it with a pal: Some brave souls are purchasing homes with friends...let us know how this one pans out. The fastest growing household type is roommate households, up 54% from 2001 to 2021, and are typically more common in large urban centres.

Cutting back on lattes won’t help: Since 2000, the average house price in Canada has more than tripled. As of June 2022, the median home costs $665,850, about ten times the median household income of $66,800 for Canadian families and single people. It’s estimated that an average income Canadian household would have had to devote close to 60% of their income to housing. You don’t have to look far to see that the state of the housing market is dire and in need of correction.

• For funsies, we did the math and found that to afford the median home in Canada, you would need to skip more than 225,000 tall lattes from Starbucks — that's if you drink that much coffee every day. So, go grab that latte and add some whip to it, because (1) you deserve it and (2) skipping it won't solve the housing crisis.

What’s next: You don’t have to look far to see that the state of the housing market is dire and in need of correction. RBC predicts that the Canadian housing market is headed for a historic cooldown following the frenzy of the last two years, expecting home prices to fall nearly 23% this year and 15% next year.

— Paisley Sim

Overheard

"I think it’s safe to say that a low response rate correlates to the slow amount of change that is happening.” — Kike Ojo-Thompson, founder and CEO of KOJO Institute, on the substantial lack of progress made towards the BlackNorth Initiative.

In 2020, more than 500 Canadian companies signed the BlackNorth Initiative to boost Black representation in their workforces. But little progress has been made to diversify company ranks in the two years since, according to an analysis by The Globe and Mail. Around 70% of the signatories either did not respond to the Globe about the racial composition of their company or said they did not track that data.

Other things we read and we liked

👩🏻‍💻 ICYMI: Money Crush Monday is back — read up on how Roslyn McLarty, Maya Adly and Karen Danudjaja started their businesses and their advice for aspiring founders. Know of a kickass woman we should profile next? Let us know!

📚 With a selection of vibrators, candles and homeware, Indigo isn't the same bookstore it was just a decade ago. In fact, the drift from books is intentional, according to president Peter Ruis.

📷 BRB as we take note on how to fix our trash Instagram feeds.

🧺 At a time when prices are rising for so many things, we're surprised to hear that the end of minimalism is here.

🎧 Career expert Marcus Buckingham takes listeners through important questions we should all ask ourselves about our careers: How do we take feedback without letting our egos get the best of us? How do we pinpoint our strengths and weaknesses at work? There's a ton of wisdom packed into this 12-minute episode.