Turmoil in the markets has renewed fears that the US did not escape history after all, that a hard landing — a recession — is coming. Whether this is all a blip from a rising yen or a justified reaction to an actual weakening of the US economy is still unknowable. But there are reasons to believe even a hard landing wouldn’t be so hard.
To be clear, a recession is never good. People lose their jobs, companies go out of business, assets fall in value, uncertainty spreads. But some recessions are worse than others. The 2001 recession was fairly mild and short, with the unemployment rate peaking at 6.2%. In 2008, it rose to 10%, while households saw much of their wealth destroyed and the recovery dragged on for nearly a decade.
Three things determine how bad any recession will be: what the economic conditions were going in, what caused it, and what the policy response is. It’s worth taking each in turn.
The current economy is in pretty good shape. In contrast to 2008, households…