But let’s remember two key facts.
Fact one. The notion that recessions cause job insecurity is bull. Even during good economic times, millions of people are at risk of losing their jobs. On one estimate, one in seven private sector jobs was destroyed each year between 1997 and 2005.
And recessions don’t increase this insecurity much. Indeed - using US evidence - Robert Hall has found (pdf) that job destruction doesn’t increase much at all in recessions. Instead, what happens is that the job creation rate slows down:
Unemployment is high in a recession because jobs are hard to find, not because more job-seekers have been dumped into the labor market by elevated separation rates.
Fact two. Recessions are not extraordinary events. Since 1955, quarterly GDP growth has averaged 0.6%, with standard deviation of 0.96. So a fall in GDP is a less than one standard deviation event (though they‘re not normally distributed).
A lot of the excitement this downturn is generating is, therefore, simply because we’ve become accustomed to years of stability. But in the longer historical context, it's these years that were unusual, not the regular experience of recession. And as Stephen Miller has shown, this Great Moderation ended last year. This could well be because the stability was only ever due to dumb (pdf) luck (pdf). And our luck might have run out.
What I’m saying, then, is that recessions are no big deal. They are a normal feature of a capitalist economy. The important point, is that economic insecurity is huge even during “good” times. That’s the price we must pay for creative destruction. Recessions change this only a little.
The question: "what can policy-makers do to stop recession?" gets too much attention. The question: "how can we protect people from the big risks they face even in normal times?" gets too little.