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The Omicron wave has reversed the global economic recovery and carries further downside risks in 2022, but all is not lost, according to Bank of America.
“Even if there are no lockdowns, we should expect brief but sharp economic disruptions in most of the world,” said Ethan Harris, global economist at BofA, in a statement late last week.
The year got off to a terrible start as governments put travel restrictions in place as the latest COVID-19 virus rages across much of the world.
The Omicron variant is expected to infect more than half of Europe’s population within the next six to eight weeks, a World Health Organization official said this morning when the United States broke the world record by getting 1.35 in a day Millions of new COVID-19 cases reported.
In Canada, Quebec reported an all-time high of 2,554 patients and 248 ICU patients, while Ontario confirmed 2,467 hospital admissions and 438 ICU patients.
The Canadian labor market, which surpassed expectations with 54,700 new jobs in December, is also expected to ease in January amid lockdowns and restrictions.
“New Omicron public health restrictions and rising cases are likely to result in a significant reversal of recent job growth and higher unemployment in January (in Canada),” noted Oxford Economics.
While most Omicron cases are classified as mild, it will have devastating consequences for us as a society, according to Vivek Goel, President and Vice Chancellor of the University of Waterloo.
“And that’s because of a couple of things. First, because it spreads as a disease and even in vaccinated populations, it spreads to many people at the same time, “Goel, who was previously a member of the Ottawa COVID-19 Immunity Task Force, said in a press release. “That leads to a lot of absenteeism, either because people have been infected or because they have been exposed and they have to go into isolation because of that.”
Expecting a brief, violent shock to labor supply in most of the world, Bank of America notes that the number of quarantined personal workers could exceed four million in the US alone.
“On a global scale, this should lead to ongoing disruption in various sectors as the Omicron wave rolls from one region to the next,” said Harris of BofA.
One worrying aspect is that Omicron has yet to make its way into the Asian countries most heavily involved in global supply chains, namely China, Japan, Korea and the ASEAN region.
“This means we could see more supply chain disruptions in the spring, even if the outlook for healthcare in the US and Europe (likely) improves significantly,” said Harris.
The latest wave could also result in much-needed rate hikes in the US and Canada being postponed to cool inflation.
“The market has been considering a rate hike in March, although we believe Omicron could delay a move a few months,” wrote Sal Guatieri, chief economist at BMO Capital Markets. “Much will depend on whether the latest wave of COVID is damaging demand more than supply (especially labor supply in the face of rising sick leave) and thus fueling inflation, as (Federal Reserve Chairman Jerome) Powell fears.”
But all of the inconveniences of Omicron can have a silver lining. If COVID-19 is downgraded from a pandemic to endemic, higher immunity can fight the virus as it circulates through the population.
While new variants remain a risk, hopefully they will not be able to overtake Omicron because it is already so transmissible and vaccine resistant.
“If this scenario occurs, we will see our medium-term economic outlook clearly upwards. The biggest beneficiaries would be the service sectors hit by the pandemic – e.g. B. Airlines and Accommodation, ”noted Harris. “It’s always darkest before sunrise.”
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