There’s a lot of scientific scrambling and warp-speed epidemiology going on right now in labs worldwide to try to figure out just how bad the new coronavirus omicron variant might be healthwise.
But there’s also scrambling on the economic side of things to try to figure out what another wave of infections, travel bans, lockdowns and restrictions might do to the United States and global recovery.
Federal Reserve Chair Jerome Powell has been on Capitol Hill the last two days saying the Fed’s watching omicron closely, along with disrupted supply chains and rising prices — and getting more ready to act if need be.
He’s also retired a favorite term — “transitory.”
“We will use our tools to make sure that this high inflation we’re experiencing is not entrenched,” Powell said on Wednesday.
So can anyone read the tea leaves on what exactly might be coming? Well, we asked the experts.
With a new, possibly more virulent coronavirus variant spreading worldwide, could it worsen already messed-up supply chains and soaring inflation? That question was put to David Wilcox at the Peterson Institute for International Economics and Joe Brusuelas at consulting firm RSM.
“Well, there’s more that we don’t know than we do know,” Wilcox said.
“Right now, there are not enough knowns and too many unknowns surrounding omicron and the global and domestic economic outlook,” said Brusuelas.
Put another way: The tea leaves … not so readable. Time to brew another cup? While we wait for that one to steep, let’s move on to some “what ifs.”
If omicron causes another serious wave of global infection, it could discourage consumer spending and job creation. Businesses would make and ship less stuff, using less energy. Supply chain bottlenecks would ease and inflation would slow.
Much more likely, though, is the opposite effect: “Inflation is likely to go up because the supply chain is likely to again be adversely affected,” said Joel Hyatt, CEO of Globality, a supply chain technology firm in Silicon Valley.
“People have trouble getting to work through lockdowns and what have you, and labor gets scarcer — particularly for those jobs where being present at work matters. Supply goes down and has an upward pressure on pricing,” he said.
It could be the same chain of economic cause and effect we saw with the last big COVID-19 wave from the delta variant earlier this year.