Job losses during the Great Recession of 2008-2009 were largely permanent job losses. Job losses during the Great Shutdown of 2020 are largely temporary layoffs. The future course of the economy will, of course, depend on the microbiology. But the economy seems well situated for a rapid recovery if testing, treatment, and vaccine development allows it.I only want to discuss Mankiw's comment above with regard to the parts I have highlighted and not his comments on tests and vaccines and what he refers to as the microbiology. The non-highlighted stuff is pretty pedestrian.
But what he notes about the job losses is very insightful. The current job losses are much different than the losses during the Great Recession.
The GR losses were the result of a business cycle decline where many capital goods-type businesses either shrunk in size or completely closed. Those people had to look for new jobs.
In the case of the current lockdown, many of those out of work will simply be able to go back to their old jobs.
Of course, this won't be 100% because some barely profitable businesses will stay shut and new government regulations may make it difficult for other businesses to restart, but overall it will be much different than the unemployment situation coming out of the GR.
I would guess that much more than 50% of those currently laid off because of the lockdown will be able to return to their old jobs.
One question may be: Will they want to if governments continue to pay them more while unemployed than when working?
-RW
That might be true, but what we shouldn't lose sight of is that what's common about both sets of job losses is that they are/were (mostly) caused by the state's interference in the economy, and not from changing preferences of consumers.
ReplyDeleteWe need to keep our eyes on the villain, and keep making this point. Just as those who worship at the state's altar blamed the Great Recession on deregulation, capitalism, etc. (pick your straw man), so will they blame the Great Shutdown on the bug.
Small business closure resulting from loss of customers and the engineered higher unemployment payments that will have the poorer half sitting on their ass as long as possible will kill even more small to midsize businesses makes the bulk of this a fools statement.
ReplyDeleteWait until round 2 commences.