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3 reasons why the Omicron variant will hurt the economy less than past waves, according to JPMorgan

A passenger who arrived from Italy administers a self-collected nasal swab at Los Angeles International Airport on December 3, 2021.

Mario Tama/Getty Images

  • The Omicron variant won’t slam the global economy like past waves have, JPMorgan said Thursday.
  • The variant’s rapid spread and reduced severity should fuel a faster and less dire wave of infections.
  • Omicron is also “unlikely” to disrupt the supply-chain recovery in 2022, the bank’s economists said.

The Omicron variant roiled holiday get-togethers, travel plans, and gift deliveries. But it won’t be enough to derail the world’s economic rebound, JPMorgan economists said Thursday.

The Omicron variant grew from a fledgling story to the world’s predominant health crisis in a matter of weeks, raising new concerns that the pandemic — and its economic fallout — will linger well into the new year. With Americans already lamenting high inflation and supply-chain problems, the variant’s rapid spread placed new pressure on recovery hopes.

That quick transmission might be what makes Omicron less problematic than the last two coronavirus waves, JPMorgan economists led by Bruce Kasman said in a note to clients. The latest surge of infections “is expected to look very different than earlier ones,” mostly because of its contagion and reduced severity. Taken with the strong pace of global recovery, the Omicron wave will form several unique trends in early 2022, the team added.

Here are the three reasons the Omicron variant won’t pose the same economic threat as previous virus waves, according to JPMorgan.

1. Every country is facing Omicron at once

The first coronavirus wave emerged in China and traveled west. The Delta wave showed up in India and the UK before spreading to the US and throughout Europe. The Omicron wave, however, is hitting everyone at once.

“Omicron’s rapid spread and reduced virulence point to a more synchronized wave across the globe,” the economists said. “While case counts are currently concentrated in the US and Europe, controls are not stringent enough to prevent the virus from spreading worldwide before the end of the next quarter.”

If the resurgence takes a path similar to the Delta variant’s, it’s possible the whole world gets through the Omicron variant at around the same time. Early signs indicate the latest wave could already be cooling off. The South African government said Thursday that the country is likely past the peak of the Omicron wave and that the variant didn’t bring a large jump in virus deaths. The note suggests other countries’ waves could soon crest, and that the pain won’t be nearly as bad as the Delta wave’s summer fallout.

2. The slowdown won’t hit any area too hard

Omicron’s rapid proliferation also seems to avert the kind of geographical damage that curbed growth in 2020 and 2021, the bank said.

“A more synchronized wave may place broader downward pressure on global growth, but it is unlikely to generate the concentrated regional weakness of earlier COVID waves,” the team added.

When COVID cases rebounded last winter, the damage was acute enough to send some European countries back into recession. The Delta wave similarly slammed the Asia Pacific region and exacerbated the global supply-chain crisis. Since more of the world’s population is now vaccinated and the Omicron variant is less virulent, the current wave isn’t likely to fuel the same kind of regional slump, JPMorgan said.

3. Supply chain recovery expected to continue

The supply-chain harm powered by prior waves is also unlikely to emerge as Omicron spreads, the JPMorgan team said in its memo.

Previous variants entangled global trade and drove shipping costs sharply higher. Manufacturers are better prepared now to weather the blow, and the supply-chain recovery will probably continue even if Omicron slows its pace, the bank said.

“We believe this wave is likely to primarily damp service-sector demand and is unlikely to disrupt the path of global industry,” the economists said.

Omicron will make for a more volatile recovery in early 2022, but as the wave peaks around the world, people can rest assured the variant won’t be as disastrous as those that came before it, according to JPMorgan.

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