- Some people experience long-term effects from the COVID-19 virus, months after the infection has passed. This is known as “long COVID”. Economically there may be similar effects.
- People who have been unemployed for a long time find it harder to get a job, and long-term unemployment can become permanent unemployment. Skills deteriorate, people become discouraged, and prospective employers adopt a “rule of thumb” that the long-term unemployed must be undesirable. The share of US unemployed out of work for more than six months roughly doubled during the pandemic. Whether this effect will apply to people on government furlough schemes is not clear.
- The pandemic has also accelerated structural change in the economy. Structural change is disruptive, with long-term economic effects. The move to home working and online retail has happened faster than expected, so the economy has had less time to adjust. The abrupt nature of change may cause additional economic damage.
- There is some evidence some economies that were hit early by the pandemic have been slower to recover (even as caseloads have fallen). Economic fear can linger. Other traumatic economic events, like hyperinflation, can change economic behaviour years after the event.
- Economic “long COVID” is a risk policymakers need to consider.