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The economy is on edge as COVID-19 cases rise

SCOTT SIMON, HOST:

The NFL's postponing games. Broadway's lights are dimming in many places. And yesterday, the Dow lost more than 500 points. The omicron variant is already having an impact on our lives. We turn now to NPR chief economics correspondent Scott Horsley for a read on the financial effects from another wave of infections.

Scott, thanks for being with us.

SCOTT HORSLEY, BYLINE: Good to be with you, Scott.

SIMON: We know this new strain of the virus is highly contagious. It has yet to be determined if it makes people more sick. Do we, though, know about what it might and can do to the economy?

HORSLEY: It's not going to help. Of course, we're still in the early days. And there's a lot we don't know. But economist Tim Quinlan at Wells Fargo has been keeping an eye on things like air travel and restaurant reservations. These are spending categories that have proven to be sensitive during earlier waves of the pandemic. Quinlan is not seeing a big drop-off yet. But he does think that spending has kind of plateaued.

TIM QUINLAN: It's too early to say omicron is putting a dent in consumer activity. But it's certainly causing people to stall the rebound that we were experiencing.

HORSLEY: What hasn't plateaued is the coronavirus itself. Infections are up more than 60% over the last two weeks. Deaths are up almost 70%. Now, a lot of that is still being caused by the delta variant. But we do know that omicron is spreading rapidly.

SIMON: We're waiting for more evidence. But there has been, I guess, what we'd have to refer to as speculation that this variant could lead to a less severe illness. If that's true, does that mean the economic impact might be more mild, too?

HORSLEY: That could reduce the impact. But what worries public health officials is even if the vast majority of people have only a mild case, omicron's so contagious, you could still wind up with a lot of people in the hospital. In Europe, where the outbreaks a little further along, we have already seen some shutdown of concert halls and amusement parks in response to the jump in cases. Now, in the U.S., there's very little appetite for government restriction.

But chief economist Diane Swonk, who's with the accounting firm Grant Thornton, says if the outbreak's bad, the economy's going to suffer even without a government lockdown.

DIANE SWONK: It has nothing to do with whatever mandated mitigation efforts are. It's just fear itself. We've seen this repeatedly - is once hospitalizations and fatalities pick up, sadly, that's when people start changing their behaviors.

HORSLEY: Now, in past waves, we have seen some variation, though, in different parts of the country. I was talking recently with a guy who owns a chain of clothing stores. What he's noticed is customers in the Northeast are much more sensitive to changes in the public health outlook. Whereas his sales in the Midwest and the South just don't change that much, even when more people are getting sick.

SIMON: And what about workers, Scott? How does the rising case count affect them?

HORSLEY: You know, we still have a lot of unfilled jobs in this country. And employers are eager to get more people into the workforce. That's less likely to happen if people don't feel safe. Older workers, in particular, are going to be reluctant to come off the sidelines. What's more, Swonk says omicron could make it harder for short-staffed factories and other businesses to keep people on the job.

SWONK: We're already in a delta wave. And now you're layering on top of it something that could spread much more rapidly and hit a lot more people. And even if it's only a mild infection, that number of people out at once can hobble workplaces.

HORSLEY: This could also be another setback for companies that were hoping to bring remote workers back into the office. Some of those plans are being postponed yet again. And, of course, that has ripple effects for the coffee shops and dry cleaners that depend on foot traffic from office workers. They've been struggling throughout the work-from-home era. And with omicron, that struggle may drag on a little longer.

SIMON: NPR chief economics correspondent Scott Horsley - thanks so much.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.