Long Covid is distorting the labor market — and that’s bad for the U.S. economy

Weeks after Charlotte Hultquist got Covid-19 in November 2020, she developed a severe pain in her right ear.

“It felt like someone was sticking a knife in [it],” said Hultquist, a single mother of five who lives in Hartford, Vermont.

The 41-year-old is one of millions of Americans who have long Covid. The chronic illness carries a host of potentially debilitating symptoms that can last for months or years, making it impossible for some to work.

For about a year, Hultquist was among those long Covid patients sidelined from the workforce. She would fall constantly, tripping just by stepping over a toy or small object on the floor. She eventually learned that the balance issues and ear pain resulted from a damaged vestibular nerve, a known effect of long Covid. After rigorous testing, a physical therapist told Hultquist she had the “balance of a 1-year-old learning to walk.”

Her body — which she said felt like it weighed 1,000 pounds — couldn’t regulate its temperature, causing dramatic swings from cold to hot.

Her work on the Dartmouth Hitchcock Medical Center’s information desk required a sharp memory of the hospital’s layout — but long Covid dulled that clarity, too. She had to quit her job as a patient care representative in March 2021.

“I couldn’t work when my memory just kept failing,” Hultquist said.

There remain many unknowns about long Covid, including causes, cures, even how to define it. But this much is clear: The illness is disabling thousands, perhaps millions, of workers to such an extent that they must throttle back hours or leave the workforce altogether.

In other words, at a time when job openings are near an all-time high, long Covid is reducing the supply of people able to fill those positions. The dynamic may have large and adverse effects on the U.S. economy.

Long Covid “is certainly wind blowing in the other direction” of economic growth, said Betsey Stevenson, a professor of public policy and economics at the University of Michigan who served as chief economist for the U.S. Department of Labor in the Obama administration.

“At a minimum, long Covid is adding a lot of uncertainty to an already very uncertain economic picture,” Paige Ouimet, an economist and finance professor at the University of North Carolina, wrote in September.

Katie Bach, a nonresident senior fellow at the Brookings Institution, has published one of the higher estimates to date. She found that 2 million to 4 million full-time workers are out of the labor force due to long Covid. (To be counted in the labor force, an individual must have a job or be actively looking for work.)

The midpoint of her estimate — 3 million workers — accounts for 1.8% of the entire U.S. civilian labor force. The figure may “sound unbelievably high” but is consistent with the impact in other major economies like the United Kingdom, Bach wrote in an August report. The figures are also likely conservative, since they exclude workers over age 65, she said.

“Mild symptoms, employer accommodations or significant financial need can all keep people with long Covid employed,” Bach said. “But in many cases, long Covid impacts work.”

Economists Gopi Shah Goda and Evan Soltas estimated 500,000 Americans had left the labor force through this June due to Covid.

That led the labor force participation rate to fall by 0.2 percentage points — which may sound small but amounts to about the same share as baby boomers retiring each year, according to the duo, respectively of the Stanford Institute for Economic Policy Research and the Massachusetts Institute of Technology.

Put another way: Long Covid’s labor impact translates to an extra year of population aging, Goda said.

For the average person, the work absence from long Covid translates to $9,000 in foregone earnings over a 14-month period — representing an 18% reduction in pay during that time, Goda and Soltas said. In aggregate, the lost labor supply amounts to $62 billion a year — equivalent to half the lost earnings attributable to illnesses like cancer or diabetes.

What’s more, foregone pay may complicate a person’s ability to afford medical care, especially if coupled with the loss of health insurance through the workplace.

A separate Brookings paper published in October estimated about 420,000 workers aged 16 to 64 years old had likely left the labor force because of long Covid. The authors — Louise Sheiner and Nasiha Salwati — cite a “reasonable” range of 281,000 to 683,000 people, or 0.2% to 0.4% of the U.S. labor force.

About 26% of long-haulers said their illness negatively affected employment or work hours, according to a July report published by the Federal Reserve Bank of Minneapolis. Those with long Covid were 10 percentage points less likely to be employed than individuals without a prior Covid infection, and worked 50% fewer hours, on average, according to Dasom Ham, the report’s author.

Jerome Powell, chair of the Federal Reserve, mentioned Sheiner and Salwati’s long Covid research in a recent speech about inflation and the labor market.

Millions of people left the labor force in the early days of the pandemic, due to factors like illness, caregiving and fear of infection. But workers haven’t returned as quickly as imagined, particularly those outside their prime working years, Powell said. About 3.5 million workers are still missing, he said.

While most of that shortfall is due to “excess” (i.e., early) retirements, “some of the participation gap” is attributable to long Covid, Powell said. Other big contributors to the shortfall include a plunge in net immigration to the U.S. and a surge in deaths during the pandemic, he added.

“Looking back, we can see that a significant and persistent labor supply shortfall opened up during the pandemic — a shortfall that appears unlikely to fully close anytime soon,” the Fed chair said.

That shortfall has broad economic repercussions.

When the U.S. economy started to reopen in early 2021 from its pandemic-era hibernation — around the time Covid vaccines became widely available to Americans — demand for labor catapulted to historic highs.

Job openings peaked near 12 million in March 2022 and remain well above the pre-pandemic high. There are currently 1.7 job openings per unemployed American — meaning the available jobs are almost double the number of people looking for work, though the ratio has declined in recent months.  

That demand has led businesses to raise wages to compete for talent, helping fuel the fastest wage growth in 25 years, according to Federal Reserve Bank of Atlanta data.

While strong wage growth “is a good thing” for workers, its current level is unsustainably high, Powell said, serving to stoke inflation, which is running near its highest level since the early 1980s. (There are many tentacles feeding into inflation, and the extent to which wage growth is contributing is the subject of debate, however.)

A worker shortage — exacerbated by long Covid — is helping underpin dynamics that have fueled fast-rising prices for household goods and services.

But the labor gap is just the “tip of the iceberg,” said Stevenson at the University of Michigan. There are all sorts of unknowns relative to the economic impact of long Covid, such as effects on worker productivity, the types of jobs they can do, and how long the illness persists, she said.

“When you’re sick, you’re not productive, and that’s not good for you or for anybody around you,” Stevenson said of the economic impact.

For example, lost pay might weigh on consumer spending, the lifeblood of the U.S. economy. The sick may need to lean more on public aid programs, like Medicaid, disability insurance or nutrition assistance (i.e., food stamps) funded by taxpayer dollars.

In all, long Covid is a $3.7 trillion drain on the U.S. economy, an aggregate cost rivaling that of the Great Recession, estimated David Cutler, an economist at Harvard University. Prior to the pandemic, the Great Recession had been the worst economic downturn since the Great Depression. His estimate is conservative, based on known Covid cases at the time of his analysis.

Americans would forgo $168 billion in lost earnings — about 1% of all U.S. economic output — if 3 million were out of work due to long Covid, said Bach of the Brookings Institution. That burden will continue to rise if long Covid patients don’t start recovering at greater rates, she said.

“To give a sense of the magnitude: If the long Covid population increases by just 10% each year, in 10 years, the annual cost of lost wages will be half a trillion dollars,” Bach wrote.

Hultquist was able to return to the workforce part time in March, after a yearlong absence.

The Vermont resident sometimes had to reduce her typical workweek of about 20 hours, due partly to ongoing health issues, as well as multiple doctor appointments for both her and her daughter, who also has long Covid. Meanwhile, Hultquist nearly emptied her savings.

Hultquist has benefited from different treatments, including physical therapy to restore muscle strength, therapy to “tone” the vagus nerve (which controls certain involuntary bodily functions) and occupational therapy to help overcome cognitive challenges, she said.

“All my [health] providers keep saying, ‘We don’t know what the future looks like. We don’t know if you’ll get better like you were before Covid,'” Hultquist said.

The therapy and adaptations eventually led her to seek full-time employment. She recently accepted a full-time job offer from the New Hampshire Department of Health & Human Services, where she’ll serve as a case aide for economic services.

“It feels amazing to be recovered enough to work full time,” Hultquist said. “I’m very far from pre-Covid functioning but I found a way to keep moving forward.”