Although the holiday spike in Covid cases, due to the contagious Omicron variant, have started to dip, its economic impact has brought more unpredictability to an already battered, albeit recovering, economy. Economic forecasters cut back on their estimates of Q1 economic growth, as stock markets went into a frenzy this Monday following expectations of more aggressive contractionary policy from the Federal Reserve. Even with these looming warnings, economists are still out concerning the long term impact of Omicron's winter spike.
As nearly 8.7 million Americans were forced to stay home due to Omicron in late December and early January, unemployment in the month of December numbered 3.9%, well within what we normally assign to "full employment". What gives? Despite Omicron's ability to sweep through industries like air travel and retail, it appears that firms are still willing to hire more workers. Jason Furman, an economic advisor to President Obama, believes that "...employers are holding on to people because they expect to be in business in a month," hinting that Omicron's impact on the labor market may be temporary.
The two words everyone may be tired of hearing - the supply chain - also continues to put pressure on the economy. In fact, it's possible that it's gotten worse - remember that Omicron took out 8.7 million workers, meaning that some of them certainly could not assist in easing supply pressures. However, that also means that that's 8.7 million people who aren't going out spending money in retail, or on dining, and so on. One theory, advocated by the authors of the article, argues that because of this short term inflationary pressures will decrease as people spend less, but long term things will pick back up again for the worse.
Perhaps the worst consequence of Omicron is that economic uncertainty is brought back once again to the forefront. As many of us hoped to enter the new year with the worst behind us, Omicron reared its ugly head and brought back the anxieties of the Delta wave. Economies generally prefer stability to instability, and it seems clear that Omicron brought more instability at one of the worst times.
https://www.nytimes.com/2022/01/24/business/economy/omicron-economy.html
I agree that the Omicron variant is adding more instability to our economy and is causing more problems than were previously predicted for the end of 2021 and the beginning of 2022. I think that we will most likely continue to have supply chain problems in the coming future, but hopefully as firms continue to hire more workers, and as cases from the Omicron variant begin to decrease, these problems will begin to be solved, and the economy will become more stable again.
ReplyDeleteIt will be interesting to see how firms are responding to the effect that Covid has had on employment. Labor shortage has played a huge role in the economy recently as firms are increasing wages in order to encourage more participation. Supply chain shortage also is playing a huge role in the economy as many companies have not been able to operate a full production due to the shortage of products. Additionally the shortage has caused prices of certain goods such as vehicles and homes which will hopefully start to decline in the future as we adapt to Covid and it variants.
ReplyDeleteI think a big with thing going forward is that with each variant that comes up, there will always be economic uncertainty. Everyone in the back of their mind fears another shut down, which I don't believe will happen to extent of the beginning of the pandemic again. In all these fears will most likely just be blips in the future and will no get near the level of 2020.
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