Identifying the shape of an economic recovery in a world of known unknowns

Drawing up forecasts amid public spending and unemployment

As shutdowns are eased around the world, forecasters are debating the likely shape of the recovery.

The optimists point to a V-shaped recovery, the pessimists L-shaped, and the cautious look for something less linear, such as W, U or √. In truth, it is very difficult to know at this stage. The risks aren't black swans, they are known unknowns, but we simply don't have enough information at this stage to form our judgment. The first set of known unknowns relates to the virus itself. As the economic and fiscal costs have become apparent, politicians have hurried to ease shutdowns, whether the infection is under control or not. It is possible that the combination of a degree of ongo...