Keeping things in perspective

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 😉

Links agreeing with Colin in some way: Homepaddock, Kiwiblog, Rates Blog, The Reserve Bank.

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 🙂