Last week, economists calculated that almost 5 million workers failed to show up at their jobs. Given the present upsurge in cases of the Omnicom variant, that should come as no surprise. However it clearly has Wall Street economists reducing their estimates of first quarter 2022 GDP.
Slower economic growth normally has a negative impact on everything from the stock and bond markets, interest rates and employment. How this will ultimately affect the economy in the months ahead is a question worrying every trader and portfolio manager in the financial markets.
The first warning sign that this wave of coronavirus infection was impacting business came during the holidays. Thousands of flights, we thought, were canceled due to weather-related concerns and maybe some no shows due to the holidays. It soon became apparent that employees from pilots to baggage handlers and everyone in between were getting sick, or forced into quarantine, by the Omicron variant.
Since then, a wave of Omicron infections has decimated the working forces of supermarkets, shipping ports, transportation hubs, and a variety of factories and food processors throughout the country. I am starting to notice this personally. Just yesterday, as I stood in a long line at my local supermarket, I noticed the lines seemed to be getting longer, even though holiday shopping is long over.
At first, my concern was simply maintaining the six feet of spacing since most shoppers were ignoring the footprint markers behind me. Masked, gloved, and behind a plexiglass partition, my turn finally came. I asked the clerk why the lines were so long.
“A lot of people are out sick,” said the weary, masked clerk.
“So why not hire more people?” I asked. In response, she just laughed, nodding towards the “help wanted” signs behind her. I noticed her nose was poking out from the top of her mask. I held my breath.
The clerk also lamented that her schedule was in chaos, since no one knew which employees would be sent home tomorrow to quarantine, or who would be sick and how long it would be until they returned. “It’s the same kind of thing you normally see when there is a big snowstorm. Some make it in, most don’t.”
And what is happening stateside is also developing throughout the globe. Europe has been struggling with the same issues. China, due to their strict isolation policies, has been managing somewhat better than most countries–until recently. This week, China’s Zhejiang Province, home to one of the country’s key ports, has suspended, or greatly reduced the transportation of manufactured goods and commodities into Ningbo port, thanks to an outbreak of Omicron last week.
Unfortunately, Ningbo is one of a handful of the world’s largest container ports and an integral link in the world’s supply chain connecting producers in East China with buyers of everything from automobiles, electronics, semiconductors, heavy equipment, machines, clothes and even toys.
In August 2021, the port was shut down for a couple of weeks because of COVID-19. Analysts estimated it cost the world about $4 billion/week during that shut down. As it stands, global shipping ports have been working to reduce the congestion that has stranded an armada of container ships along their shores. Here in the U.S., the government has made efforts to relieve the port congestion in Los Angeles. On the East coast, the New Jersey and New York ports have, until recently, managed to keep up with port congestion. However, Omicron is steadily reducing the number of longshoremen available. As a result, the line of ships building off the coast of Long Island is increasing daily.
During the last week, several economists have downgraded their forecasts for the first quarter 2022 GDP. Some are simply postponing growth, pushing it out to the second quarter. Economists are arguing that while Omicron may hurt growth in the short-term, the variant will flare out, and growth will resume in time to show higher by May or June 2022. Let’s hope they are right.