Just as Americans and Europeans were eagerly awaiting their most normal holiday season in a couple of years, the omicron variant has unleashed a fresh round of fear and uncertainty — for travelers, shoppers, party-goers and their economies as a whole.
The Rockettes have canceled their Christmas show in New York. Some London restaurants have emptied out as commuters avoid the downtown. Broadway shows are canceling some performances. The National Hockey League suspended its games until after Christmas. Boston plans to require diners, revelers and shoppers to show proof of vaccination to enter restaurants, bars and stores.
A heightened sense of anxiety has begun to erode the willingness of some people and some businesses to carry on as usual in the face of the extraordinarily contagious omicron variant, which has fast become the dominant version of the virus in the United States.
Other people, though, are still traveling, spending and congregating with other people as they normally do, though often with a cautious wait-and-see perspective. Holiday air travel remains robust. Many stores and restaurants are still enjoying solid sales.
At the same time, no one knows yet what omicron will ultimately mean for the health of the Western economies, which have endured a wild ride of downturns and recoveries since early 2020.
“These mutations keep coming,’’ said Robin Brooks, chief economist at the Institute of International Finance. “What is the probability that sometime we get a really nasty one? No one has any idea. This thing is mutating, and it’s very, very hard to say.’’
Will omicron cause outbreaks at factories and ports, disrupt operations and worsen supply chain bottlenecks that have forced up prices and contributed to the hottest U.S. inflation in decades?
Will it mean people will hunker down at home again and spend less on services — restaurant meals, concerts, hotel stays — which could weaken the economy but potentially defuse inflationary pressures?
Will return-to-office plans for white collar workers be put on hold indefinitely, deepening the hit to many cities’ downtown businesses?
Or will omicron prove a blip that scarcely slows what has become a surprisingly strong recovery from the short but intense pandemic recession?
Spooked by uncertainty and fear of the worst-case scenarios, stock markets around the world sold off for three days before rebounding Tuesday.
“We don’t know whether this is good or bad for growth or inflation in the medium term,’’ said Megan Greene, global chief economist at the Kroll Institute. “We just don’t have enough data yet.’’
Unable to assess its longer-term consequences, businesses, consumers and policymakers have struggled to respond to the omicron threat.
Danielle Ballantyne, a Chicago dietitian, had planned to visit some stores and seek inspiration for holiday gifts. But as omicron spread, she scrapped that idea in favor of staying home and shopping online.
“From what I have been hearing in the news,” Ballantyne said, “omicron is more contagious. So I am trying to be more selective in where I go in terms of big public spaces.’’
At its stores in big cities like New York and Chicago, the clothier Untuckit is reporting a 15% drop in traffic, similar to what it experienced when the delta variant started spreading last summer.
“It impacts people’s perception of comfort and safety and their willingness to go out,’’ said Aaron Sanandres, a co-founder of the company.
As infections have spread, European countries have so far gone further than the United States, with restrictions ranging from a full lockdown in the Netherlands to indoor mask mandates in the United Kingdom.
A theater in western England refunded $240,000 in tickets. The Advantage Travel Group, which represents U.K. travel agents, said that business — flights, cruises and package holidays — plummeted fell 40% in mid-December from a month earlier. A diner in central Madrid absorbed cancellations for about half its booked space one week recently.
In London, downtown restaurants are suffering as office workers stay home.
“As soon as they said work from home, it’s completely emptied,’’ said Sally Abe, a chef at the Conrad Hotel in central London.
On Tuesday, Britain announced that it would provide 1 billion pounds ($1.3 billion) in grants and other aid to help the hospitality industry survive omicron. The government bowed to pressure from pubs, restaurants and other businesses whose income has plunged in the aftermath of public health warnings.
Since the pandemic hit nearly two years ago, it has imposed one economic challenge after another. Economies all but shut down when the virus struck early last year. More than 22 million people in the United States alone lost jobs. Bars, restaurants and hotels were particularly devastated.
But record-high infusions of government spending and, eventually, the rollout of vaccines triggered an unexpectedly powerful recovery, giving many households the confidence and financial wherewithal to resume shopping. And it sparked optimism for the 2021 holiday season: In an updated forecast shortly before omicron emerged as a serious threat, the National Retail Federation said U.S. holiday sales were on track for a record-breaking year.
One fear now is that omicron infections will further disrupt manufacturing and shipping, worsen the supply chain backlogs and keep inflation simmering. It could also increase consumers’ already intensified demand for goods, which would magnify the supply shortages.
“If everybody is freaked out that going to a bar or restaurant is going to land them in a hospital, they may continue to buy goods,’’ said Greene, the Kroll Institute economist. “So that could exacerbate the short-term trend and make inflation worse.’’
On the other hand, she said, “if growth is really dampened (by omicron), that should take the heat off inflation.’’
There are other reasons to think the recovery could decelerate. In the United States, economic aid from federal spending and relief checks is fading. The Federal Reserve is reducing its economic support. China’s economy, the world’s second-biggest after the United States, is slowing.
For now, the U.S. bond market is signaling more concern about economic weakness than about runaway inflation: The yield on the benchmark 10-year Treasury note remains at historically low levels, below 1.5%.
That said, it’s also possible that the economy will prove resilient against the latest challenge COVID has thrown at it. One measure of retail traffic shows that the new variant has made little difference — at least so far. For the week that ended Dec. 18, store traffic was up nearly 20% from a year earlier, though down 23% from the same week in the pre-pandemic year of 2019, according to Sensormatic Solutions. For the Black Friday that ended Nov. 27, sales were up 30% from last year.
Peter McCall, Sensormatic’s head of retail consulting, noted that shoppers are still going to retail stores but are now favoring open-air shopping centers and outlet malls more than enclosed shopping centers.
Arnold Donald, CEO of Carnival Corp., the world’s leading cruise company, said this week that Carnival had experienced “a little spike’’ in cancellations but predicted that it would prove just a short term blip.
“The booking patterns are strong,’’ Donald said.
So is the traffic at some big retailers. Several hundred people lined up for the opening of the Toys R Us flagship store Sunday at the American Dream mall in East Rutherford, New Jersey.
“We were prepared for a big day, but it was even bigger than we thought,’’ said Yehuda Shmidman, co-founder of WHP Retail, which owns Toys R Us.
Abt Electronics in Chicago says it’s enjoying a strong holiday season so far, with sales up 10% from a year ago. But John Abt, co-president and a grandson of the company’s founder, said he’s noticed that omicron is changing how some people shop. Though fewer customers are entering stores, there’s increasing demand for curbside pickup.
He’s also made changes for workers designed to prevent the spread of COVID: He’s requiring them to stay at the counters or warehouses where they work instead of jumping back and forth to different workplaces.
“I am an optimist,’’ Abt said. “I am not a worrier. This is life. And you have got to roll with the punches.’’
___
Wiseman reported from Washington, D’Innocenzio from Cape Cod, Massachusetts. AP Writers Kelvin Chan, Sylvia Hui and Danica Kirka in London contributed to this report.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
