There were important obstacles to wealth creation in 2008. Inflation went negative for a while, which meant there was a decline in the wages at which labor supply and demand would remain stable. Yet wages don't adjust downward in dollar terms - employers lay off workers, rather than cut wages, because wage cuts create very unhappy workers. That's a substantial fraction of what went wrong. [This is a very condensed summary of Scott Sumner's book The Midas Paradox].
That's also happening today. Prices have declined, or at least wholesale commodities have. Wages likely haven't declined to compensate.
Yet for this month, that's just a tiny part of what's happening. Wage adjustments wouldn't keep waiters or oil drillers employed. I expect there's currently a severe shortage of nurses and delivery people, which won't be quickly solved. In that sense, what we're experiencing is a massive shift in labor, more comparable to what happens in a major war than to what happens in a recession.
Value was destroyed by WW11, the 1957 pandemic, the 1968 pandemic, and 9/11. Yet it's unclear how many of those caused recessions.
Wars and severe pandemics tend to cause inflation (for pandemics, that's likely only significant if people doubt that they'll live long enough to value having money a year from now), and inflation tends to postpone or prevent recessions.
Whether we get 2008-style labor market imbalances depends a fair amount on what inflation is like over the next couple of years.
The TIPS spread implies that the market expects low inflation for a long time, which tends to suggest a long, drawn out recession.
But I have low confidence in any forecast along these lines. Will large fractions of the newly unemployed prefer unemployment checks over new jobs that are, for now, relatively high stress and high risk? We don't have much historical evidence to guide predictions here.
The Fed has substantial power to influence inflation, but seems to have a strong tendency to under-react to large changes.
The ISM Purchasing Managers report is the fastest way to get a decent estimate of how GDP is increasing or decreasing. The ISM report on March activity surprised many people, including me, by reporting a nearly neutral level of 49.1 for March. That's a big difference from the 38.9 that was reported on October 1, 2008, which was the biggest single piece of evidence that convinced me to sell stocks in advance of the worst part of that crash (I did not handle this year's crash anywhere near as well as that). Readings below 40 indicate sharp contractions, while readings near 50 suggest activity is nearly unchanged.
I'm changing my estimate of Q1 GDP to approximately unchanged, and I'm confused as to why the ISM report doesn't show recession-like changes.