Colin Espiner is back from his Christmas break and he is surprised to see how panic stricken New Zealander’s are. It was the same for me when I came back from the US in mid-November – sheer panic had seemingly overtaken people view of what a recession was.
Lets keep in mind that people currently expect unemployment to peak at just over 7% in 2010, following a 2% decline in activity in 2009 (or about 3% per person). Scary numbers aren’t they – well no.
See, most people won’t notice the recession apart from a little bit of nervousness and cheaper prices (has anyone seen the deals on appliances!). For a massive majority of people there is no need to worry about a recession.
However, the impact of the recession is not the same across people – incomes don’t fall by 3% for everyone, some people lose their jobs and truly struggle. Even so, we have a tax and welfare system that redistributes from those who are working to those that have lost their jobs – the pain of being unemployed will not be as severe as it has been in the past. Furthermore, education and training are available all over the show nowadays – giving people the opportunity to take advantage of changes in the labour market.
Colin is right – if this is the end of the world then it is a bit of a let down 😉
Update: I wonder if Colin convinced Blanchard to come out with this (it is part of a roundtable discussion by economists, ht Economist’s View). Either Colin is inspirational – or his comment was impeccably well timed 🙂