Different national cultures extend beyond welfare provision. Historically, the American government paid unemployment benefits directly to displaced workers, rather than to companies experiencing a down-turn in business. Europe, in contrast, tended to pay companies to retain their workers during a down-turn. From some sort of bird’s-eye view, the very dynamic American economy tended to shift assets from dying industries to growing industries, while the European economy labored under the burden of assets trapped in old industries.
The Covid pandemic imposed an odd sort of shock on the world economy. The disruption did not spring from serious economic problems. Serious economic problems sprang from the virus and from government responses to the emergency. The economies could rebound once adequate responses had developed (vaccines, testing). In the meantime, governments pumped in money. In Europe, this took the form of governments paying companies which “furloughed” their workers. In the US it mostly took the form of expanded and extended unemployment benefits, along with Economic Impact Payments.
The American stock markets soared. Since, just over half of Americans own stock (mostly through their retirement plans), net worth and market income increased for many people. For a bunch of older, but still working-age Americans, an early retirement beckoned. Many others built up their savings to the point where they could ride out extended unemployment. On top of this, the United States suffered a much worse hit per capita from Covid than did Europe, Japan, or Canada. This may have made many Americans skittish about going back to work if they don’t absolutely have to. Many others got sick and had to call in sick to work.
In any event, America’s labor participation rate has not recovered as well as have either other economic indicators or the participation rates in other countries. With a booming economy, American employers are not able to find enough workers to fill the jobs that need doing.
What to do? First, work the people you do have longer and harder. The number of hours worked actually increased from late 2019 to mid-2021. Second, they have raised the pay for those who do work in hopes of pulling more workers back into paid work. Labor costs have risen more in the United States than in other countries. Third, one would expect employers to pursue mechanization as much as possible. Will this close off the possibility of return to work for many of the now-unemployed? Or will economic growth and innovation provide new jobs for those who want them?
In the meantime, while excess money creation provides the basic force driving the inflation, the supply-chain disruptions, the war in Ukraine, and labor shortages are making worse that basic inflation. In turn, the inflation is providing ammo for those who oppose plans for a further expansion of the social safety net to more closely resemble that of Europe.
 Greg Ip, “The Mystery of Low U.S. Labor Participation,” WSJ, 5-6 February2022.
 Like, say, the collapse of a housing bubble with a devastating impact on financial systems.
 I realize that I’m supposed to refer only to the S&P, but the Dow went from 26,000 in July 2020 to 36,000 in January 2022.
 The death rate per 100,000 people: US, 311; Italy, 281; UK, 269; France, 233; Germany, 172; Canada, 114; and Japan, 25. See: Mortality Analyses – Johns Hopkins Coronavirus Resource Center (jhu.edu)
 The basic money supply, the M2, rose from about $15 trillion in 2020 to about $22 trillion in 2022.