Ômicron disrupts the year-end of the American economy

Canceled Christmas shows, requests from authorities to avoid cruise ships, planes that cannot take off: the omicron variant of the coronavirus has multiplied the problems for the US economy, possibly contributing to the shortage of labor and even to the rising inflation.

“We are beginning to see the first signs of the impact of omicron in the economy”, mainly in the services sector, as is the case of bars and restaurants, explained Oren Klachkin, economist at Oxford Economics, in an interview with AFP.

The world’s biggest economy had hoped to leave the Covid-19 pandemic behind, but on New Year’s Eve, the coronavirus is back to scare.

After being detected a month ago, the omicron variant — extremely contagious — caused the number of cases to soar.

The situation led the United States Centers for Disease Control and Prevention (CDC, its acronym in English) to advise on Thursday (30) travel on cruise ships, pointing out that “the risk of contracting Covid-19” in these boats “is very high”, even for the vaccinated.

In this sense, about 5,100 cases were reported in US territorial waters between December 15th and December 29th, while in the period between November 30th and December 14th there were only 162.

However, it is still difficult to quantify the economic consequences of this variant, “especially since it is the holiday season, which affects the data”, detailed Oren Klachkin.

Meanwhile, analysts at Moody’s agency recently reduced their growth forecast for the first quarter of 2022 because of omicron, from 5% to 2%.

omicron effect

The “fear of contagion” and declining restaurant reservations “are only part of the equation,” warned economist Diane Swonk of Grant Thornton in a Twitter post.

According to her, it is being difficult to find labor due to the number of sick people. “It’s not something new, but amplified by the micron”, he highlighted.

The shortage of workers, amplified by quarantines after a positive test or contact with patients, can paralyze large sectors of the economy.

Air transport is also facing difficult days, with thousands of flights canceled due to the volume of personnel who had to isolate themselves, at a time of demand heated by the holiday season.

To limit absences, the government of Joe Biden decided, last Monday (27), to reduce the duration of the recommended quarantine, from ten to five days.

This lack of labor could aggravate a situation that has been going on for a few months: there are not enough workers in the United States to fill all the vacant posts, particularly given the high number of early retirements since the beginning of the pandemic.

‘modest’ impact on inflation

“We anticipate that the job market will continue to recover in 2022, with around five million new jobs created, just over 400,000 per month,” anticipated Nancy Vanden Houten, an economist at Oxford Economics.

However, the expert indicated that this does not mean that there will not be shortages “in some sectors”.

The unemployment rate and the number of jobs created in the United States in December will be announced in a report to be released on 7 January.

Some economists also fear that the disturbances associated with the new variant will aggravate inflation, which has registered its biggest increase since 1982, pressured by problems in factories and transport on a global scale, among others.

“Inflation in many services and in energy prices could go down, at least temporarily, but there is a real risk that the variants are now more inflationary than deflationary,” Swonk explained.

Mark Zandi, chief economist at Moody’s, expects a “modest” impact of the omicron on inflation.

“Companies have made significant strides in alleviating bottlenecks in global supply chains,” he said.

“Furthermore, although more workers are getting sick with the micron […], they can, as it is a less severe form, go back to work more quickly,” he added.