Column: The new economic normal – living with COVID

A person receives a dose of the Moderna vaccine against the coronavirus disease (COVID-19), at the Music Auditorium in Rome, Italy, January 5, 2022. REUTERS/Guglielmo Mangiapane

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ORLANDO, Fla., July 14 (Reuters) – Central banks are raising interest rates to tackle the highest inflation in decades, economic growth is slowing, recession looms and financial markets are in turmoil .

It is against this bleak backdrop that consumers, workers and businesses are realizing that, despite successful global vaccination programs and “V” shaped recoveries in economies and markets, COVID-19 will not has not disappeared.

Of course, the 40-year high inflation that many consumers are currently experiencing stems in large part from supply chain and bottleneck issues that are a direct result of the global lockdowns imposed to combat the initial wave of COVID. -19 in 2020.

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Inflation is approaching 10% in many countries and interest rates are rising accordingly. Canada’s central bank raised its key rate by a full percentage point on Wednesday, and traders are betting the Federal Reserve will do the same later this month.

There is also the loss of output due to the pandemic-fueled recession of 2020. Assuming pre-pandemic trend growth of 2%, JP Morgan economists estimate the cumulative loss of US output and income over the two years to $1.5 trillion, or almost 8% of annual GDP – which they say is likely to be permanent.

The equivalent losses for the UK and the eurozone are even larger at 9% and 12%, respectively, they estimate.

Leaving aside China and its idiosyncratic zero COVID policy, the highly transmissible BA.4 and BA.5 subvariants currently sweeping the world serve as a reminder that the virus itself is here to stay.

Authorities from Japan to New Zealand on Friday warned residents to take precautions to slow the outbreak and help prevent health systems from being overwhelmed, while the White House this week released a multi-pronged strategy. flaps to combat new variants. Read more

The new waves may not change the economic situation, but they will be persistent brakes on activity. Economic scars will take longer to heal and growth will be slower to recover.


The severity of illness caused by the virus is greatly reduced thanks to vaccines, and travel restrictions, quarantine protocols and mask mandates have mostly been dropped. Commerce has reopened and restaurants, sporting events, hotels and airports in many areas are bustling.

Although there is no appetite for the struggle and the sacrifices that the lockdowns have brought, people’s perspectives and behaviors have changed. Stores are open but shoppers are not returning en masse; offices are open but many employees are working from home; trains are running but passenger numbers are down.

“The hope is that we will get back to near normal,” said Karim El Nokali, investment strategist at asset management firm Schroders, noting that supply chain issues, labor market distortions , rising inflation, and behavioral changes are now permanent economic features, not Bugs.

“It’s hard to quantify, but it will continue to impact the economy. Without a doubt.”

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Schroders compiles a monthly “Google Mobility” index based on location tracking data from Google that charts changes in activity around specific industries.

Its July index shows that workplace mobility in the United States is about 25% below the pre-pandemic baseline, which it defines as January 3 to February 6, 2020.

Retail and leisure activity in the United States is down about 5% from the pre-pandemic baseline, according to the index, while Google data shows that mobility around centers of public transport has decreased by more than 20%.

JPMorgan has compiled an index that tracks the bank’s corporate thefts compared to the same day in 2019. It’s volatile and shows steady improvement over the past year. But traffic volume has only recently and briefly returned to pre-pandemic levels, and for the most part remains much lower.

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US authorities say new variants now account for 80% of all new COVID cases. Most of them are the highly transmissible BA.5 subvariant, which means infections could skyrocket in the coming weeks.

New daily cases top 200,000 and the seven-day rolling average is rising enough to suggest a fourth wave of the virus is underway.

We have seen how the virus affects the labor market. Millions of people have already left the U.S. workforce by taking early retirement, staying home for childcare reasons, or opting for more flexible part-time jobs that fly under the official radar. .

The labor force participation rate is still more than a percentage point below its pre-pandemic level, meaning the job market is extremely tight. Additional waves of the virus could keep more people at home, further distorting the relationship between employment, wages and inflation.

Matt Orton of Carillon Tower Advisers, an asset management firm, notes that after going through the past two years, people are now more confident to make their own risk-reward decisions on all aspects of their lives. regarding the virus.

But things won’t be the same.

“Psychologically we’re past that stage, but there’s been a change in behavior. Things seem more normal, but not quite normal. The world has changed structurally,” he said.

(Views expressed here are those of the author, columnist for Reuters.)

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By Jamie McGeever; Editing by Paul Simao

Our standards: The Thomson Reuters Trust Principles.

The opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed to integrity, independence and freedom from bias by principles of trust.