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We are in a supply recession, thus far, not a demand recession. There's plenty of demand (including for labor), but economic activity has shrunk (two quarters
by rossdavidh 4y ago
We are in a supply recession, thus far, not a demand recession. There's plenty of demand (including for labor), but economic activity has shrunk (two quarters in a row, even) because of supply problems (including people no longer in the labor force, some of whom retired early in 2020 and aren't coming back).
That doesn't mean it won't become a demand recession; it might. But the only thing I see that looks at all like 2008 is that house sales in at least some areas seem to have "frozen up", because everyone knows the prices from 3 months ago aren't good any more but nobody is sure how much cheaper they should be. So, the market isn't functioning all that well. But every other part of the economy seems to be functioning just fine, in terms of there is a market price. The price keeps going up, for everything except housing and gasoline, but that's not a recession.
Now there are a lot of things about a supply recession that are not as bad as a demand recession, but there is one problem: we don't have them very often, so we're not prepared. There are many well-understood ways in which government can step in and be the demand that is missing (e.g. infrastructure spending) or ameliorate the affects of low demand (e.g. unemployment benefits). We don't have very many ways for government to step in and be the supply that is missing; we have the Strategic Petroleum Reserve (already being used) and the government has some food supply, but for just about everything else the government cannot provide the supply.
As to your second question, right now the economy is in a very fragile state, so it is much more vulnerable to any shocks, for example if China invaded Taiwan or something. So many things are not working well, from a supply point of view, that there's not much slack to deal with fresh problems. Whether or not we get another big shock probably determines the answer to your second question.