My friend Yishan Wong started a very interesting thread on Twitter, hypothesizing that the labor shortage (and hence the inflation) could be largely attributed to the million+ covid deaths and a much sicker population where tens of millions people are experiencing medium- and long-term impact of the disease. In theory, this makes a lot of sense. Our economy to a very large extent is people being productive. Less people working and working people being less productive means less economic output, which is the definition of recession. Humanity is experiencing an unprecedented setback since the advent of vaccinations and antibiotics. In a way, we are back to the early 20th century days that infectious diseases kill and impair people and we don’t have a very good solution of our current predicament. COVID-19 is the Tuberculosis of our time, which killed people like Franz Kafka and George Orwell. Imagine all the great books they could have written if they had been healthy.
It’s hard to find the data to fully back this hypothesis and I hope more research can be done on this. But according to this Quartz article, there is evidence that Long covid is shrinking the British workforce. There is less immigration due to COVID and there was also a marked drop in labor participation rates, especially among people aged 50 to 64: most of which was due to long-term sickness. Furthermore, I don’t think data we have so far account for people who temporarily lose their cognitive functions due to COVID. People could be back to the work but they are not performing at the same level like they used to be.
The current economic data is probably telling us that our population are still quite sick with COVID-19. Among all the problems we have, public health is probably the most important one to address before we even think about inflation or recession.
A great data point: https://www.npr.org/2022/07/31/1114375163/long-covid-longhaulers-disability-labor-ada