Before the pandemic, the number of workers not at work due to illness was around 1 million people every month. When the pandemic began, this number jumped to 1.5 million. But over the past six months, it has declined back to 1 million, see chart below.
Combined with the normalization in the participation rate and the employment-to-population ratio, the bottom line is that Covid is no longer holding back labor supply.
In other words, the source of strong wage growth has over the past six months shifted from the Covid-induced reduction in labor supply to labor demand. The implication for the Fed is that more demand destruction is needed to get wage inflation under control.
Source: BLS, Haver Analytics, Apollo Chief Economist
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