Page says the two central considerations are what level of “scarring” is left behind, that is, despite this being an event-driven recession, even when the event vanishes from the public consciousness, there will be “scarring” left behind, from jobs lost and businesses collapsed, even if the more typical scarring of a recession, such as high debt levels, are not prevalent this time.
Guy Miller, head of macroeconomics at insurance company Zurich, says this recession differed greatly from those which went before as it is a “recession by design”, that is, it was a public policy decision to cause a recession, when lockdowns were introduced.
He says: “What subsequently happened was, in the midst of a health and economic crisis, policymakers couldn't allow a financial crisis to develop, so monetary policy was ramped up very quickly.
"What is different about the response this time is that we have fiscal and monetary stimulus working together, something we have wanted for years and shows lessons were learned from the austerity following the GFC.
"The aim was to allow financial markets to continue to function, and primarily to ensure that the productive fabric of society remained intact to allow an eventual reopening.
"We saw, in contrast to the financial crisis, countries such as the UK and US act very quickly to support businesses, particularly small, so that shops, for example, could stay in business, even if closed.
"This was a different approach to that of the GFC, not slow and not cautious.
"The outcome of all of that was as intended. A floor was put under financial markets, allowing funding through record bond issuance. And the fiscal transfer to households left many better off. They didn’t have to fill in long forms or wait for months for it – in the case of the US it was sent in the mail.”
Another substantial variable, this time, is that household savings have risen during the recession, and according to the Office for National Statistics (ONS), the total of savings built up is over £200bn in the UK.
In more typical recessions, savings rates are very low when the recession strikes, as they usually follow a period where credit was easy to obtain and confidence among the public was high.
When the recession subsequently comes, people are forced to deplete their savings to make up for the loss of income.
This then slows the recovery from the recession when the cycle turns or the structural issues have been addressed, as people use their enhanced income to pay down debt, or build up savings.
