From Airports to Broadway, Omicron Mocks Economic Recovery

By John M. Rhodes Last updated Dec 28, 2021

The Covid is once again wreaking havoc on the economy.

The disruption is different this time around, however. Vaccines and boosters are widely available, Omicron’s symptoms appear to be milder than with previous variants, and government officials pledge not to force a shutdown 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.

“It’s all up in the air again,” said Wylde, who blamed a combination of Omicron and confusion over New York City’s vaccine mandate for private sector workers. “The longer this goes on, the harder it will be to get people back to the office.”

Nightmares at the airport

Covid chaos is most glaring at airports.

As of Tuesday alone, more than 2,000 flights were canceled around the world.

These cancellations, which come at the busiest time of the year for air travel, were in part due to an increase in the number of cases among crew members, putting additional pressure on the shortage of labor. -working in industry. Combined with extreme weather conditions, the problems have created a nightmare for countless American travelers this holiday season.

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“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.”

In a bid to ease pressure on the economy, the U.S. Centers for Disease Control and Prevention on Monday shortened the recommended time frames for people to self-isolate after testing positive for Covid-19 if they have no symptoms.

“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.

In the week ending Nov. 13, the number of diners seated at U.S. restaurants was down only 5% from the same period in 2019, according to OpenTable. But restaurant traffic slowed down considerably after Omicron emerged at the end of November. In the week ending Dec. 27, the number of seated diners was down 27% from two years earlier, OpenTable said.

“It’s not just delaying the reopening. It’s reversing it, temporarily,” said Aneta Markowska, chief economist at Jefferies.

Markowska knows this firsthand. Dozens of Jefferies employees tested positive for Covid-19 in early December, forcing Wall Street bank to ask employees to work from home, stop virtually all business travel, and cancel social events .

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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.

Another sign of the times, the big technology companies, including Amazon (AMZN), Facebook and Twitter (TWTR) also pulled out of CES in person next month, dealing a blow to one of Las Vegas’ biggest conferences.

The sports world is also in shock, with the National Hockey League suspended its season last week and several college football games canceled due to infections.

Even the New York subway is cutting service due to a worker shortage caused by Covid.

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.

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Mark Zandi, chief economist at Moody’s Analytics, told CNN last week that he plans to darken his economic forecast for 2022 due to Omicron’s double blow and the apparent demise of the Build Back Better Act.

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.

It is too early to say whether Omicron will end some of the recent progress in the supply chain crisis, which has been a major driver of the biggest inflation surge in the United States in decades.

“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”

Wall Street isn’t panicking about Omicron, at least not now.

After a massive sale on Black Friday, the US stock market recovered all its losses. Stocks rose sharply on Monday and the S&P 500 could end at another all-time high on Tuesday. This would mark his 70th record of the year, according to Bespoke Investment Group.

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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.

Kelly is optimistic about the economy’s ability to ignore Omicron, in part because of Spider-Man. He pointed out how, despite Omicron, “Spider-Man: No Way Home” became the first film to garner $ 1 billion in global sales during the Covid era.

“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.”

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