A year ago, with Covid-19 cases falling and vaccines getting rolled out, the U.S. economy entered a remarkable period of recovery. The boost to the economy that comes with the fading of the Omicron wave could be even more pronounced.
Over the week ended Wednesday, there was an average of 215,418 newly confirmed Covid-19 cases each day in the U.S., according to the Centers for Disease Control and Prevention. That is 73% below the daily average peak of 806,107 registered in the middle of last month. And it isn’t just the U.S. where cases are falling—they are dropping sharply across the world, from the U.K. to Brazil to India.
Omicron doesn’t cause as much severe illness as the Delta variant, but the sheer number of people it infected means it is leaving a lasting mark. In the U.S., where a smaller share of the population is vaccinated than in other developed countries, the toll has been particularly high. An average of 2,313 people a day died from Covid-19 over the week ended Wednesday—a number eclipsed only by last winter’s surge.
Even so, the drop in case counts, which precede deaths, has been sharp enough that a number of Democratic governors are now joining their Republican counterparts in relaxing mask mandates. And many consumers, judging from credit- and debit-card data from
Bank of America,
have already started going to bars and restaurants again. That is a reflection, says Bank of America economist
of people’s growing impatience with the pandemic. As soon as there is a break in the clouds, they ditch their umbrellas.
As a result, the initial spending response to the fading of Omicron might be more pronounced than what occurred last winter. And there are other factors that could magnify that boost.
First, even though the number of new cases are still high, they are so far falling much faster than after last winter’s surge. That is in part because the Omicron variant has infected so many people that it now has fewer of them left to infect. By the CDC’s count, there have been 28.4 million Covid-19 cases in the U.S. since the start of December, an amount equal to more than 8% of the population. And that is probably a huge undercount, since many cases don’t get recorded—which might especially be the case now, since Omicron’s symptoms are often less severe, and since many people learn they are positive from at-home tests.
The many people who have been infected with Omicron, a large share of whom haven’t been vaccinated, might throw up at least a temporary wall of immunity that could keep case counts low through the spring. That could induce people to return to activities such as going out to eat, returning to the office and getting back on airplanes like never before during the pandemic.
More people might also return to the workforce, easing some of the hiring strains that companies have been facing. The global nature of Omicron’s rise might also mean that supply-chain problems will dissipate as cases fall. Rather than one place, and then another, getting hit by a surge in cases, leading to rolling production and shipping disruptions, Omicron hit a lot of places nearly simultaneously. With hope, that will ease the shortages of many goods that have been driving up inflation.
Even so, expanding workforce participation and a better supply-chain situation probably won’t be enough to keep the Federal Reserve at bay. To the contrary, the increase in demand and boost to hiring that comes with the fading of Omicron could be stronger than the Fed—and most investors—now expect, leading the central bank to raise interest rates sharply. Bank of America’s Mr. Harris now expects Fed policy makers to raise their target range on overnight rates by a quarter point at each of their remaining seven meetings this year.
Of course, the potential for yet another variant to rear its head remains. Over the next several months, however, a belief that the wall of immunity from Omicron will be lasting, which is possible, could take hold. It might be too early to say that the all-clear signal has been sounded on Covid-19, but people could act as though it has just the same.
Write to Justin Lahart at [email protected]
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