The Omicron Variant: An Economic Perspective
Global supply chain disruptions have led to empty grocery store shelves. (Brittani Burns/Unsplash)
As the Omicron wave recedes, medical and news reports tell of the extreme stress and limits of the U.S. medical infrastructure. However, when analyzing the variant’s impact on the nation with scrutiny, a new perspective emerges. The dire ramifications on the economy — often overlooked — have been stained with fingerprints of the Omicron.
The Aftermath of the Delta Variant
The economy saw impressive growth during the fourth quarter of 2021. A surge of 2.3 percent from the third quarter left economists optimistic for the upcoming year of 2022. Exports were also reviving at a remarkable rate. As the apparent growth left the nation relaxed, a novel issue began to creep its way into late 2021.
Late 2021: The First Sightings
In late November of 2021, the Center for Disease Control (CDC) reported the first case of Omicron in the U.S. By December, as cases grew, consumer spending fell by 0.6 percent. Economists believe this ultimately led to goods fairing better than services, increasing compound inflation. In a news release, the National Retail Federation’s chief economist said, “People who stay at home because of the variant are more likely to spend their money on retail goods rather than services like dining out or in-person entertainment. That would put further pressure on inflation since supply chains are already overloaded across the globe.” Consumer spending accounts for two-thirds of the U.S. economy. Although the decrease of 0.6 percent was subtle, its implications foreshadowed an economic spiral.
Early 2022: Slight Economic Derailment
Slow economic growth in January 2022 caused economic optimists to rethink their positions. Data from the IHS Markit — a subsidiary of S&P Global — denotes a pronounced impact from the Omicron on the U.S. economy. According to a press release from 2022, the U.S. composite output and service business activity indexes saw 18-month lows, while the manufacturing PMI and output index saw 15-month and 19-month lows respectively. Briefly put, with soaring wage bills and rising input costs, the Omicron wave led to labor shortages and worsening supply chain disruptions.
The stock market saw significant impediments with notable fluctuations in Nasdaq and S&P 500. Investors slash future plans as market stability remains elusive.
Opinions: Optimism and Hesitation
Despite the particularly modest growth, the U.S. economy managed to add approximately 467,000 new jobs — nearly half a million. This robust growth may indicate resilience and an economic bounceback for the latter half of 2022. Signs of future sales and orders are strong, and the receding wave leads economists to remain optimistic. However, investors remain cautious though the market has gained relative stability.
Omicron has undoubtedly left the economy in a mixed position, still healing from ramifications while pushing for recovery. Nevertheless, economists continue to debate the U.S. economy’s position in the latter half of the year and will continue to do so in the years to come.
Sources & Further Reading