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How to Avoid a W-Shaped Recession (Mostly Economics, 7 min read) History lessons from the previous crisis. 1918 Spanish flu shows relaxing social distancing too early led to a devastating second wave. President Roosevelt’s administration in 1936, pleased with recovery from depression, introduced austerity. This caused the economy to contract into another recession in 1937. To avoid a W-shaped recession, remove public health measures and/or economic stimulus slowly.
Welcome to the World of Stagflation (OMFIF, 3 min read) The column argues that we will face 1970s style cost-push inflation due to massive debt levels. Policymakers will face a dilemma: reduce inflation by allowing higher unemployment, or let inflation run higher but save jobs and reduce the cost of debt. The author believes the latter would prevail.
Labor Demand in the Time of COVID-19: Evidence from Vacancy Postings and UI Claims (NBER, 15-page read) Job vacancies in the US have crumpled (in the latter half of the March) and are now 30% fewer than at the start of the year. The collapse in the job market has affected all US states, irrespective of the intensity of the virus spread or the timing of the lockdown. However, essential retail and nursing jobs are significantly sought after.