How will the coronavirus omicron variant affect the economy?
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Scientists are racing to figure out omicron, the new coronavirus “variant of concern,” and governments are scrambling to devise strategies for dealing with it. Several have rushed to enact new travel bans and dust off mask requirements.
On Friday, the United States announced that it would ban visitors from South Africa and seven other countries in the region. And on Monday, President Joe Biden said he expects no additional travel bans and doesn’t think new shutdowns are necessary.
So what might omicron have in store for the U.S. economy?
We don’t need more lockdowns for the virus to damage the economy. It can do that via plain old fear. Gad Levanon, who heads the labor market institute at The Conference Board, said that if omicron turns out to be, say, a slightly worse delta, we might expect a similar economic result.
“Spending on leisure and hospitality would be impacted, spending by older people and families with young children that are not vaccinated — they will be spending less — and especially, I think, tourism will take a big hit,” he said.
The U.S. has ended up trying to manage the virus rather than stamp it out, but some other countries — countries with whom the U.S. trades — are inclined to take a stricter approach.
“China is still persisting with its zero-COVID policy, so if we saw more disruption and closures of factories, that would weigh on supply chain problems that have already been an issue,” said Paul Ashworth, chief U.S. economist at Capital Economics.
How omicron might affect inflation is another question that, for now, is unclear.
“In the near term, you’re going to have a sharp, sudden reduction in consumer demand,” said Ian Bremmer, president of Eurasia Group.
That would bring inflation down. But if omicron turns out to be particularly serious, supply chain problems might intensify in a month’s time, keeping prices up. “The effect is mixed but differs over time,” Bremmer said.
We don’t know yet what threat omicron poses to global health, but we do know that the virus controls the economy, and the information we get over the next few weeks will dictate the path our economy takes.
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