Despite the rapid spread of the Omicron variant, the U.S. economy ended 2021 in surprisingly strong shape. What will 2022 hold?
. In the four-week period that ended on December 25th, initial unemployment insurance averaged less than two hundred thousand a week, and reached the lowest level in more than a half century. Based on impressive numbers like these, the Federal Reserve Bank of Atlanta estimates G.D.P. growth of 7.6 per cent in the final quarter of the year, up from 2.3 per cent in the third quarter, when the Delta variant held back spending.
Of course, all economic forecasts should be treated skeptically. The optimistic predictions for G.D.P. growth are based on extrapolations from recent experience—in this case, high levels of spending, strong hiring, and lots of pent-up demand—and then making adjustments. In normal times, this is an eminently reasonable way to go about things. The potential problem here should be obvious: these aren’t normal times.
Even if the U.S. economy does get through the Omicron wave relatively unscathed, with few or no lockdowns, the new variant could affect production in the Chinese economy, which supplies many components and finished goods to the U.S. China just recorded the largest number of weekly cases since suppressing the initial wave of the pandemic. The spread of Omicron represents the biggest challenge yet to Beijing’s “zero” policy.
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