From Airports to Broadway, Omicron Mocks Economic Recovery
The Covid is once again wreaking havoc on the economy.
“This is definitely a setback for the recovery,” Kathryn Wylde, president and CEO of the New York City Partnership, an influential business group, told CNN in a telephone interview.
With Covid cases skyrocketing, many companies have told office workers to stay home, dashing hopes of bosses and local businesses to reunite with their employees in person in January.
Nightmares at the airport
As of Tuesday alone, more than 2,000 flights were canceled around the world.
“The whole world is tired of this thing. It leads to international frustration with governments that have not been able to control it,” said David Kelly, chief global strategist at JPMorgan Funds. “It is a virus which is smarter than our political systems.”
“We want to put people back to work, especially essential jobs, to keep society running smoothly,” Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, told CNN’s Jim Acosta. .
Slowdown in restaurants, office closures
Meanwhile, restaurants, among the businesses most affected by Covid, are under pressure again.
“It’s not just delaying the reopening. It’s reversing it, temporarily,” said Aneta Markowska, chief economist at Jefferies.
Office closures like the one at Jefferies also result in employees being placed on leave from the cafeteria and other building departments, compounding the economic impact, Markowska said.
A weak start to 2022
All of this explains why some economists are lowering their forecasts for early 2022.
“It’s going to create a very weak moment for the first quarter,” said Markowska. She expects the U.S. economy to grow at an annualized rate of just 1.5% in the first three months of 2022, the worst quarter since the recovery began in mid-2020. Markowska added that Omicron could cause the US wage bill to contract in January, reversing a string of large monthly gains.
Kelly acknowledged that spending will likely be lower in early 2022 due to Omicron and the improved child tax credit in Build Back Better. “This is not enough to drive the economy into a recession. It only prolongs this latest wave of recovery,” said the JPMorgan strategist.
Will Omicron cause more unrest in the supply chain?
A significant unknown is what the latest spike in Covid-19 cases means for inflation and muddled supply chains. The Delta wave that emerged earlier this year has added significant pressure on supply chains as workers fell ill, especially in factories in Asia.
“Much of the problem stems from overseas production issues and a shortage of truck drivers and warehouse workers,” said Gus Faucher, chief economist at PNC. “To the extent that Omicron keeps people from working, it has the potential to exacerbate supply chain problems and drive up prices. ”
The good news is that Omicron is hitting at a time when pressure generally eases on global supply chains as demand slows in January and February.
“Consumers go into hibernation. It gives everyone a chance to catch up,” Kelly said.
“Smaller and smaller impact”
Ultimately, the impact on the economy, supply chains and daily life will depend on how long the Omicron wave lasts – and how society responds to it. And there is reason to hope that Omicron evolves so rapidly that its impact could be relatively short-lived.
“Obviously, a lot of Americans weren’t afraid to go to the movies,” Kelly said. “With each wave there is a smaller and smaller impact. Just as the virus has mutated, the economy has adapted to the virus.”