The emergence of a new COVID-19 variant is raising fresh uncertainty for the U.S. economy, even as President Biden vows that the country will not see more lockdowns.
After wading through a summer surge in cases driven by the delta variant, the U.S. is now bracing for the arrival of omicron, a strain identified by the World Health Organization last week as a “variant of concern.”
Health experts say that while the new variant appears to be more infectious than previous strains, they are not sure yet how dangerous it might be or how it’ll fare against vaccine-created antibodies compared to previous variants.
“It seems more contagious or transmissible than delta and it has several mutations. Other than that, we really don’t know most things about it,” said Julia Raifman, assistant professor at the Boston University School of Public Health.
Still, officials and experts are emphasizing the need to take precautions to slow the spread of the virus, especially as the winter months approach and people spend time together indoors, where the disease can more easily spread.
“We know that reducing the amount of air that people share reduces COVID transmission and so the best way to do that while still allowing us to be around one another is for everyone to wear masks,” Raifman said.
Biden on Monday said he would not recommend any “lockdowns” or other limits on public gatherings. In a speech, Biden said the omicron variant was a cause for “concern, but not a cause for panic.”
“We have the best vaccine in the world, the best medicines, the best scientists, and we’re learning more every single day. And we’ll fight this variant with scientific and knowledgeable actions and speed. Not chaos and confusion,” Biden said.
The U.S. economy held up much stronger against the emergence of the delta variant this summer than many analysts expected despite an initial drop in consumer activity and travel.
Revised figures from the Labor Department showed job growth holding strong even as schools faced early shutdowns and millions of workers remained unable to rejoin the workforce. Consumer spending and incomes also rose despite high inflation, lining the U.S. up for a stellar fourth quarter after a summer slowdown.
While the Biden administration is not expected to push for any nationwide lockdowns, persistently higher cases and hospitalizations could still suppress the economy even if local governments don’t impose new restrictions.
“It just depends on how serious [the variant] is and how different it is — what new risks it poses — and I just don’t think we have a handle on that,” said Aaron Sojourner, economics professor at the University of Minnesota.
Sojourner said the general effectiveness of COVID-19 vaccines against delta helped shield the economy. Those concerned about the impact of the disease were able to take steps to protect themselves, while those eager to ignore the virus still faced fewer restrictions.
“If [omicron] breaks through at a higher rate or has worse effects if it breaks through, then I think we could see people react and withdraw,” Sojourner said.
The U.S. and other nations have already imposed travel restrictions on several countries from southern Africa, with officials defending the measures as necessary to give them more time to study the variant and how it interacts with vaccines.
It will likely take several weeks until health experts know how COVID-19 vaccines respond to omicron, the severity of the symptoms it causes and how difficult they may be to treat. Until then, economists say it’s far too soon to know how it could affect the U.S. economy.
“There are more unknowns than knowns,” said Joe Brusuelas, chief economist at audit firm RSM, adding that he is not yet changing his forecast for growth in the fourth quarter or 2022.
“We should be quite cautious around extrapolating changes to employment growth, inflation and policy from a strain that we just don’t know enough about.”
The emergence of omicron could also throw another wrench into global supply chains, particularly if outbreaks in poorly vaccinated countries lead to further factory shutdowns or shipping delays.
While retailers have been rushing to build up inventories ahead of holiday shopping season, the new variant could add more fuel to rising prices for many consumer goods.
At the same time, surging cases could cause fuel prices to fall by suppressing travel and industrial production. Doing so, Brusuelas said, could throw inflation readings out of whack at a pivotal time for policymakers.
“We could see heightened volatility inflation readings, and no one’s going to be able to make heads or tails of what’s happening,” Brusuelas said.
The Federal Reserve is facing growing pressure to reduce its monthly purchases of Treasury and mortgage bonds at a faster rate following a burst of inflation this fall. Raphael Bostic, the president of the Federal Reserve of Atlanta, told Fox News on Friday that the pace of the pandemic could affect the pace of its taper.
“COVID has really disrupted supply. So, there are supply chain issues all over the economy. And, also, COVID has really caused a lot of American families to not be able to spend the way they had through their first year and a half of the pandemic,” Bostic said.
“If you have higher demand and less supply, you’re going to see inflation. And so one of the things I’m really looking at is, to what extent can we get past our COVID dynamic?”