The Pandemic Caused Significant Economic Impacts; Not All Inflation Is Related

In a recent blog, we commented that the pandemic has not changed the potential path for economic growth. This graph shows GDP growth starting in the mid-1990s (+1.3% for the Atlanta Federation for the third quarter of 2021). The horizon shows a 2% growth rate. Note that the left side of the graph shows much higher growth than the right side. Growth fluctuated between 4 and 5% in the 1990s and between 3 and 4% in the first decade of this century. However, after the Great Recession, the economy became a 2% growth regime that lasted 10 years before the pandemic began.

Pandemic effect
The purpose of this blog is to examine the impact of the pandemic, including its impact on inflation, whether the impact will be permanent, and how it will impact economic growth in the short and long term.


The biggest complaint from the company seems to be the lack of qualified candidates. It should be borne in mind that the foreign labor market is already tight (3.5% unemployed) and such complaints have become a major problem.

In 2021, through early September, when the federal program ends, industries requiring low-skilled/low-income workers (recreation/hospitality, retail, etc.) will compete with enormous federal unemployment benefits. Ricefield. September employment data seems to disappoint the market, but polling week (week of September 12) is at the start of the month and could show a significant improvement due to the suspension of the federal program. I don’t think it’s like that. We still believe that the October and November employment reports show significant job creation.

We’ve tracked Continuous Unemployment Insurance (CC) data by state and divided the states into states that have written off an additional $300 of unemployment benefit for several months. (Rejection). .. Not (inclusion). In mid-September, inclusion reduced CC by -27% from May 15, with the exception of CA (CC was only -8.2% under May 15 in early October).

Rejection, however, reduces the number of SS by -45%. However, since then, there has been an 8 percentage point increase in inclusion status, which is fully in line with a 9 percentage point decrease in failure status. Others may disagree, but our conclusion is that this federal program limited re-employment in participating states, and now that it’s over, population density is increasing. ..
The graph shows that with the end of the special federal unemployment program, CC is rapidly approaching pre-pandemic levels. (Compare the left and right sides of the graph.)

The impact of the pandemic on the retirement of a large number of workers, both over the age of 65 and near retirement, also has an impact on the workforce. This contributes to a shortage of workers as well as a shortage of women returning to overwork. Due to distance learning (i.e. schooling via Zoom), many women, especially those unable to work from home, are leaving their careers. Today we hear that there is a staff shortage in the children’s industry and not all schools are “normal” anymore before the pandemic. This has prevented many young mothers from returning to work. This appears to be an ongoing employment issue until the pandemic is over.

Labor shortages also encourage permanent investment outside residential areas.

Companies have responded to the shortage of applicants by investing in labor-saving technologies. As shown in the first graph below, unit labor costs have decreased after the initial increase in labor costs due to company regulations related to Covid. While part of this jump in the unit labor cost chart is due to the main effect, many of the jumps in the non-residential table are due to companies trying to use technology for their employees. We assume that the continued tight labor market will continue the upward trend in fixed investment (especially in technology).


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