This seems right, but I think we're seeing how resilient the real economy is, given appropriate financing. It's almost always the financial/monetary side that's the problem.<p>An economy can usually make more of stuff, or substitutes, and/or consume relatively painlessly. The pain kicks in when the financial sector feels pain. The real economy reshuffles if it's financed adequately.<p>Monetary policy, currently, finds itself oddly theoryless. I think this has actually made for better decision making. The own goal of trying to save and/or reduce debt in response to a shock hasn't been scored.<p>So... I agree that the economy has had to do a lot of resource, shuffling. Some prices have gone up in the real economy. People are still unemployed, in sectors like travel that really got shut down. In others, there's are some struggling to find labour. Mostly though, it's a case of "look how easy that was." In the financial economy, credit is available, keeping everything ticking.
The UK's Coronavirus Job Retention Scheme (where people are put on furlough and the government contributes to wages) seems to have damped the creative destruction usually seen in recessions. To use a basic example, assuming there will be more remote work in the future compared to pre-COVID times, there will likely be fewer people who commute and fewer people who buy sandwiches at Pret.<p>Perhaps a better solution is to make furlough portable, so that workers can read the writing on the wall and be part of the reallocation we are soon to see. [1]<p>[1] <a href="https://blogs.lse.ac.uk/covid19/2020/11/05/making-furlough-portable-would-encourage-people-to-move-into-new-jobs/" rel="nofollow">https://blogs.lse.ac.uk/covid19/2020/11/05/making-furlough-p...</a>
Maybe occasional shocks to the labour market would be a good policy going forwards. It seems a lot of people have suddenly found much better jobs just by being forced to look...