Your humble blogger has argued that central banks are not going to be able to do much to address our current very bad and getting worse inflation outbreak. This inflation is not the result of excessive demand, as commonly conceptualized, but a marked, and it sure looks like durable, contraction in productive capacity.
Some of that loss is due to Covid. The US has lower labor force participation than before the pandemic, yet unemployment is low and many establishments complain about the difficulty in getting workers. Covid led many, particularly in the medical establishment, to retire early. Covid also got some couples to realize they could get by on one income and they’ve decided they like it that way. Some low wage workers decided they aren’t going back to high risk positions in restaurants and retail. Some got long Covid and can’t work full time. And a million people