Since the pandemic began, there has been a structural increase in the number of people who are sick, see the chart below, which shows a significant jump in the number of people with a job who are not at work due to illness. The permanent change in the number of people who are ill since the pandemic began is consistent with studies here, here, and here that find that Covid is a key reason workers are still missing in the workforce, and hence why the labor force participation rate remains subdued. Immigration growth is rising steadily, but the bottom line is that it will take time before wage inflation is back at pre-pandemic levels, and, as a result, the Fed will keep rates higher for longer.
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