WASHINGTON: Holiday events have been scrapped in large numbers, thousands of flights are off limits, and the new year could see more issues relating to the worker shortage and the recent wave of price increases.
We are beginning to see signs that Omicron is having an impact on the economy, mainly in the areas where face to face interactions are most important, in particular service sector businesses like bars and restaurants, said Oren Klachkin of Oxford Economics in an interview.
The world's largest economy had been poised to put COVID-19 in the rearview mirror, but the virus is once again playing the spoiler on the eve of the new year.
The number of new cases has gone up to record levels during the holiday travel season due to the highly contagious Omicron variant that appeared a month ago.
After 5,013 cases were reported in US territorial waters between December 15 and 29 compared to just 162 in the previous two weeks, health authorities warned Americans to avoid cruise travel.
Even fully vaccinated travelers may be at risk for getting and spreading COVID 19 variants, the US Centers for Disease Control and Prevention said this week.
It is hard to quantify the economic consequences of this new variant, according to economists.
Moody's analysts lowered their growth forecast for the first quarter due to Omicron, but cut it to around two percent rather than the five percent previously expected.
The fear of contagion causing canceled events and the decline in restaurant reservations are part of the equation, according to the economist Diane Swonk of Grant Thornton, who warned that employers face worsening manpower issues due to the rise in infections.
She said this was not new, just magnified by Omicron.
More workers in quarantine are in quarantine due to a positive COVID 19 test or contact with an infected person, and the resulting personnel shortage could affect a large part of the economy.
Swonk said that we have seen the beginning of what I - and clearly the CDC fears - will be a surge in those out sick and unable to keep even vital services going.
There were thousands of flights canceled over the Christmas holiday as airlines struggled to get enough flight crews on planes.
President Joe Biden's administration has cut the recommended isolation period by half to five days for illnesses without symptoms in an effort to ease the strain of long quarantine requirements.
Businesses across the country struggled to fill open positions, despite a wave of retirements and a growing reluctance to return to in-person work because of the Pandemic.
In November, the unemployment rate dropped to 4.2 per cent, but participation in the workforce remains well below the pre-pandemic level. The jobs report will be released on January 7.
Oxford Economics expects hiring to continue and the economy to add 400,000 jobs a month in 2022, but that doesn't mean there won't be shortages in some sectors, economist Nancy Vanden Houten cautioned.
Some economists fear that inflation will be worse if the variant disrupts manufacturing and transport worldwide, as it has soared to the highest rate in nearly four decades.
Swonk said that variations are now more inflationary than disinflationary, which could temporarily abate, but there is the real risk that they are more inflationary than disinflationary.
Mark Zandi, chief economist for Moody's, said he expects the price impact of the new variant to be modest, unlike the Delta strain that significantly fanned inflation. Supply bottlenecks have cooled and more workers are more likely to get sick with Omicron than Delta, but they should get back on the job sooner.