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What the omicron variant means for the economy, businesses, and jobs –



The omicron variant doesn’t spell complete disaster for the economy, but it’s not great, either. It reinforces what’s been true throughout the pandemic: What happens to the economy is contingent on what happens with the virus, and as long as the virus isn’t under control, neither is the country’s economic destiny, or the world’s.

The United States economy is in a better place than it was in the earlier days of the Covid-19 outbreak. Jobs are returning, though in a rockier fashion than some optimists hoped for, and unequally for subsets of workers. GDP growth in the fourth quarter of 2021 is expected to be strong.

It’s too early for the effects of omicron to start showing up in most economic data. Still, the variant is obviously making a difference and throwing a wrench into the recovery.

Millions of Covid-19 cases means millions of people missing work while in quarantine, and that means serious disruptions. Flights are canceled. Hospitals face staffing shortages. Businesses are shuttering and reopening. Shows and sporting events are shutting down, off and on. Schools have once again been thrown into chaos. Amid fear of the virus, a subset of the public is choosing, once again, to stay home.

The question isn’t whether omicron will have an economic impact, it’s how big it will be and how long it will last. “We’re getting a sense that there are a lot of infections, but it’s not going to, in all likelihood, overwhelm us. But how long is it going to be around? Because that is disruptive,” said Mark Zandi, chief economist at Moody’s Analytics.

The effects won’t be experienced equally. The scenario for someone who has paid leave or can work from home is quite different from someone who doesn’t have paid leave and has to work in person. Disruptions for businesses will also depend on what happens to their workers and customer bases. What’s more, the government support that undergirded many in previous times during the pandemic — expanded unemployment insurance, the extended child tax credit, small-business loans — has disappeared.

“We are on our own, which to some degree may be a reason why we muscle through it, work through it,” Zandi said. “Buckle in, we’re going to make our way through this as best we can without checks and PPP money and rental assistance, we’re going to have to get through this and people are going to have to keep on working.”

There are two competing public health factors: The omicron variant is spreading very fast, and the risks associated with it appear to be somewhat milder than with other variants, especially for people who are vaccinated and boosted. In terms of economic impact, these are offsetting factors; it’s not clear whether the spread of the virus or the mildness of it will weigh more heavily on people’s behavior.

Still, it’s impossible that omicron wouldn’t have some sort of effect. When I walk by a bar or restaurant in New York City right now, they are markedly less crowded than they were a few months ago (even considering the colder weather). Staff is out sick at many businesses. How many teachers and students are in and out of schools every day varies significantly. My office is once again closed.

Diane Swonk, chief economist at Grant Thornton, outlined in a recent note what she believes are two scenarios for omicron and the economy. The sunnier version says that the virus surge is short-lived and ends quickly, as it did in South Africa. And while fear of getting sick and reduced work hours slows activity, it won’t really harm consumer spending. In that version, GDP slows in the first quarter, but it’s not catastrophic. The more dire version paints, of course, a more dire picture: Omicron collides with delta, and even though there isn’t a government-mandated lockdown, there’s an effective one as so many people get sick. What exactly will happen remains an open question.

“Forecasting during the pandemic has been akin to standing in quicksand,” Swonk wrote. “Every time it seems we have a tether to pull us out, the ground beneath us shifts again in response to a new wave of infections.”

Many economists believe the impact of omicron will be significant, but the hope is that it will be quick. That’s what Wall Street appears to be betting on.

“The stock market is at a record high because investors, I think, believe that this could be the tail end of the pandemic,” said Ed Yardeni, founder and chief investment strategist at Yardeni Research. “It is just as disruptive as the delta was and the original variant, in some ways more so, because it’s spreading so rapidly. What’s different about this variant is it’s spreading like wildfire, and the hope is, like a wildfire, it burns itself out quickly.”

Many economists have cut their forecasts for economic growth in 2022 due, in part, to the omicron variant. Zandi, from Moody’s, has cut his forecast for GDP growth in the first quarter of the year to 2 percent annualized compared to 5 percent.

It’s possible that omicron could fuel inflation, with central banks in the United States and around the world expressing such concerns. If demand yet again heavily exceeds supply, it could continue to be a problem on prices. However, Zandi says he expects the impact on inflation to be modest, partly because businesses and industries have had some time to work supply chain issues out. Still, there are risks around the supply chain reaction to omicron, and they stretch far beyond the borders of the US.

“One thing that made delta so disruptive was that it really took out Asia, Southeast Asia, where a lot of the supply chains begin, and they take a different approach to responding to the pandemic,” Zandi said. “They tend to shut things down, and that is highly disruptive.”

The economic recovery in the US has been uneven. Inflation has wound up being more of a problem than many economists, policymakers, and the White House had hoped. We talk more about the supply chain than anyone ever imagined. Jobs are coming back, but it’s inconsistent — the economy added just under 200,000 jobs in December, falling short of analysts’ expectations. That was recorded before the omicron wave really took hold.

Aaron Sojourner, a labor economist at the University of Minnesota and former senior economist at the Council of Economic Advisers, said it’s unlikely businesses will lay off workers as they did early on in the pandemic. Many employers are having a very difficult time hiring right now, and they don’t want to lose people and then try to get them back again. Plus, the hope is that the variant won’t be as disruptive as variants past, especially with vaccines and better treatments available.

“My suspicion is that we’ll have temporary disruptions driven really by health challenges, but it won’t be so much layoffs, it won’t be job destruction, it will be more schedule unpredictability, staffing unpredictability,” Sojourner said.

It appears to be the case that the unvaccinated will be the ones to cause more disruptions. Sojourner estimates that people without at least two vaccine doses are 2.4 times likelier to miss a week of work because of Covid-19. Vaccination status aside, it’s low-income workers who are missing work more than high-income workers — and who are often also less likely to have paid leave.

Throughout the pandemic, there’s been a tension between public health interests and economic interests — despite the fact that there’s really no getting back to a normal economy until and unless the virus is under control. That tension has been on display, in part, with the CDC’s decision to change its guidance on quarantine periods for Covid-19. It now says people who test positive for the virus but don’t have symptoms need to isolate for just five days and wear a good mask for five more. Previously, it recommended 10 days of isolation.

The decision has come amid pressure from the business community, such as the CEO of Delta, which has pushed a change in guidelines in order to ease worker shortages and get sidelined employees back faster. Some critics have panned the CDC’s move as one that prioritizes corporate profits over public health. That may be true, but there’s also a tricky line for workers to walk — especially those without paid leave. For many people, missing 10 days of pay is an untenable proposition. If the US had paid leave for all workers, the scenario would be different — and brighter.

“If people are contagious and infectious, they pay the cost of isolating. But everyone else gets the benefit, and that’s not fair, it’s not efficient,” Sojourner said. “It leads to bad decisions from a social perspective. That’s true for workers, and that’s true for firms.”

The good news about omicron and the economy is that we have much better tools to deal with the situation than we have had at other moments in the pandemic.

“There’s a bunch of low-cost, win-win strategies that can be used to protect health and promote livelihoods and keep the economy going, but they’re nothing new,” Sojourner said, citing vaccinations, boosters, and masks, among other measures. “They require work and resources to pull off, but to the extent you can pull them off, you improve health and the economy.”

If people do lose jobs or are laid off, they still get unemployment insurance. Extra cash that went out from the federal government during the pandemic is still helping as well. However, that money will start to run out, and more pandemic-related help from Washington, DC, is not on the way.

A senior White House official told CNN that beyond maybe “something small” for restaurants, economic supports such as expanded unemployment insurance just aren’t on the table because the economy is strong. That may be true, but the burden is not shared equally — people who can’t work from home are being pushed out to put themselves at a health risk to keep their households afloat and the economy running. And if they do get sick and have to miss work, that comes at an economic cost to them and to businesses as well.

“Fundamentally, we’re still in a world where people think the economy is made up of profits and corporate interests, and as long as we think about our economy in that way, we’re never going to get to a point where we’re actually providing the public health resources [along with] the big investments and labor market supports that actually help people thrive. And until we do that, we’re never going to get out of this situation in a healthy way,” said Rakeen Mabud, chief economist and managing director of policy and research at the Groundwork Collaborative, a progressive think tank. “We’re really seeing how public health decisions that prioritize profits over people are stacking the deck against people and their families.”

For the time being, the country seems to be hoping omicron is a temporary danger for people’s health and the economy. We’re basically white-knuckling through it.

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Venezuela Holds Rare Call With Bondholders as Economy Recovers – BNN



(Bloomberg) — Venezuela’s government is making a fresh attempt to open channels with international investors, presenting potential deals in the oil and tourism sectors and talking up new economic growth data. 

Advisers, led by top economic aide Patricio Rivera, held an hour-long call on Wednesday with at least two dozen bondholders and fund managers from the U.S. and Europe, according to four people with direct knowledge of the conversation. The call was organized by the Venezuela Spain Chamber of Industry and Commerce. 

Rivera, a former Ecuadorian Finance minister who is spearheading reforms aimed at liberalizing Venezuela’s economy, briefed the investors on policy shifts and the government’s commitment to become more market friendly, the people said. He also said the government was open for investments in several sectors, from oil and minerals to tourism, the people said.  

Rivera did not respond to a request for comment. 

Venezuela has had limited contact with debt holders since it defaulted on bonds in 2017. It owes at least $60 billion plus interest on those defaulted notes. The call comes as the country breaks a seven-year recession, posting economic growth of  7.6% in the third quarter of 2021, according to preliminary data, and as it exits a four-year bout of hyperinflation. 

Despite the new outreach, Venezuela remains under U.S. economic sanctions that pose an important roadblock to American bondholders. 

©2022 Bloomberg L.P.

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Xi resets policy priorities to boost economy – The Tribune India



Yogesh Gupta

Former Ambassador

China’s Central Economic Work Conference (CEWC), held at Beijing from December 8 to 10, 2021, decided that all stakeholders should work actively to maintain stability in the macro-economy in view of new challenges as the country holds the Winter Olympics from February 4 to 20, 2022, and the 20th Congress of the Communist Party of China (CPC) later this year. What made the economic planners to rethink the policy direction was the sharp dip in China’s GDP growth rate from 18.3% in Quarter 1 of 2021 to 7.9% in Q2, 4.9% in Q3 and 4% in Q4.

Structural changes ordered by President Xi Jinping such as reducing loans to the real estate sector, lower emission targets resulting in power cuts and the zero tolerance to Covid-19 had played an important role in decelerating the economic growth. Xi is personally involved in directing the real estate policies as he considers the unchecked growth of this sector as posing a threat to China’s economic stability.

New measures undertaken by the Xi regime included severe restrictions on giving bank loans, allow hugely indebted developers to default to rein in large unproductive expenditure and announcement of a property tax on a trial basis in certain provinces to discourage the purchase of multiple properties to curb speculation. Given that the real estate sector accounts for 29% of the Chinese economy, these measures, according to some economists, may reduce China’s GDP growth by about 0.5% in 2022 and thereafter. These restrictions have strained the local government’s finances, as selling land is an important source of revenue. Several local governments slashed the salaries of their staff, weakening the consumption.

In the last two years, China has undertaken several measures to reduce its greenhouse emissions, including controlling of its coal-fired power plants to meet its targets of peaking carbon dioxide emissions by 2030, lower the carbon dioxide emissions per unit of GDP by over 65% (from 2005 level) by 2030, increase the share of non-fossil fuels and forest stock. Decrease in power generation by coal-fired plants and rationing since September 2021 disrupted industrial production in many provinces as several industries were forced to cut production and reduce jobs. Recurrent outbreaks of Covid in some areas and China’s zero tolerance approach again forced several businesses to close and confined about 20 million people at home. The working of several companies in technology, education and gaming sectors was adversely impacted due to the regulatory actions, resulting in lower earnings and loss of jobs.

At the CEWC, it was felt that new external challenges had arisen as President Biden had not only continued the policies of his predecessor but also taken a harder line with his allies towards China. The Comprehensive Investment Agreement with the EU had remained frozen and China’s relations with Australia and Japan had deteriorated. These countries had become more vociferous in criticism of China’s human rights record and applied a number of sanctions against the Chinese companies and individuals for investments and exports. Several Chinese leaders appeared nervous about the slowing of economic growth in 2022 as Xi is expected to seek an unprecedented third term as President. They advised him that priority should shift to maintaining growth and stability so that the Chinese economy could convey a picture of strength.

Amid deterioration in China’s external environment, the conference identified securing supplies of primary products such as food, soybean, minerals and energy as a priority to prepare for the post-Covid world. “The Chinese people’s rice bowl must be firmly held in their own hands at all times,” Xi emphasised. He underlined the need to establish a strategic materials reserve to secure minimum needs at critical moments and work on a comprehensive conservation strategy. Other four priorities agreed were “common prosperity, capital regulation, defusing major financial risks and carbon neutrality. Concerns were expressed at the high level of unemployment among the migrants, the youth and possible outflow of foreign exchange as the US dollar strengthened following rise in the interest rates.

In view of these reasons, it was agreed that the government would have to give bigger policy support to the economy. China’s central bank had also conveyed dovish signals, cutting the reserve requirement ratio to the banks in a departure from central banks in the developed countries. Though the policymakers remained committed to structural reforms, it was agreed to slow down the regulatory crackdown and provide targeted support to SMEs, first time homebuyers, more funding for technology innovation and green investments.

China’s foreign trade made impressive gains in 2021, reaching $6.05 trillion as it functioned as a supply house to the rest of the Covid-stricken world. Trade with the US soared by 28.7% ($755.6 billion) and India by 43.3% (total $125.66 billion, Indian exports $28.14 billion, imports $97.52 billion). The increased global demand was chiefly responsible for 8.1% growth of China’s economy in 2021.

Chinese leaders are worried that external demand may not sustain as other major economies come out of Covid and start exporting this year. Consumption in China has not moved beyond 55% of the GDP (54.3% in 2020) in recent years due to the saving habits of the Chinese people for expenditure on health, education and old age. The government is, therefore, forced time and again to resort to big investments to drive up the growth rates.

It is now trying to increase investments in research and innovation (its R&D expenditure reached 2.4% of GDP in 2020), adoption of intelligent technologies and digital economy. While these technologies will yield efficiencies and mitigate to some extent the adverse impact of declining workforce, these will not lessen the latter’s adverse impact on lowering consumption. China will, therefore, be forced to accept sub-5% economic growth in the coming years as it rebalances its economy away from non-productive expenditures and starts experiencing the negative effects of population decline.

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The so-called 'gig economy' is on the rise — here's what that means for Alberta workers –



They’re the people who pick you up in an Uber or deliver groceries to your door — so-called gig workers, referred to as “independent contractors” by the companies for which they work — and across Canada, there’s an ongoing debate about the future of their industry.

Last month, a report from the Ontario Workforce Recovery Advisory Committee recommended that those who work in the “gig economy” — for example, working for apps such as Uber and Skip The Dishes — should be guaranteed a minimum wage, along with some other protections.

No exact analog to that committee currently exists in Alberta. A spokesperson for Tyler Shandro, Alberta’s minister of labour and immigration, said the provincial government’s primary commitment is to support workers as the economy continues to recover.

“Alberta’s government continues to monitor the gig economy, as it is an evolving sector with unique needs,” said Joseph Dow in an email.

According to a study released by Statistics Canada in 2019, around eight per cent of all workers in Canada participated in gig work in 2016, up from 5.5 per cent in 2005. 

Uber Eats courier Spencer Thompson is shown in Toronto in a 2021 file photo. On the heels of new recommendations being made for gig workers by the Ontario provincial government, an Alberta labour leader says a conversation needs to be had around the future of gig work in the province. (Frank Gunn/The Canadian Press)

Efforts to update laws around how gig workers are paid and what benefits they are entitled to has been a contentious issue over the past few years. 

During the last federal election campaign, Conservative Leader Erin O’Toole said that the 1.7 million Canadians working in the gig economy were “left behind” during the pandemic.

An Alberta labour leader says despite the same issues existing for those participating in Alberta’s gig economy — low wages, insecurity and lack of benefits — no conversation is being had provincially about the supports available for these workers.

“I’m profoundly concerned about the shift towards gig work,” said Gil McGowan, president of the Alberta Federation of Labour.

“It’s bad for individual workers. But I would argue that it’s just as bad for the economy, because when people are faced with that kind of insecurity, they can’t participate in the economy in the same way as workers in other sectors.”

Brandon Mundy, a delivery driver with Instacart in Calgary, says working in the gig economy has helped him through some difficult times — but he’s hoping changes are introduced to mitigate the risks of working in a competitive and saturated market. (Helen Pike/CBC)

Brandon Mundy is a delivery worker with Instacart, a grocery delivery service.

He previously delivered with food delivery platform DoorDash, but said he stopped working for that service due to long periods of delays between orders.

“It can get incredibly competitive these days, because of how saturated the delivery driver industry is right now,” he said.

Even though Mundy said he tends to make more working with Instacart, he’s noticed smaller payouts recently. Plus, he’s been putting significant wear and tear on his vehicle.

“I would sure hope [Alberta] introduces support for gig workers,” Mundy said. “Especially with how popular it is now, especially through COVID.”

Efforts to unionize and departures of platforms

Those gig workers completing tasks for apps like Uber and Lyft are considered independent contractors by the companies. 

Therefore, the company isn’t obliged to pay minimum wage or other protections — but that is a “smoke screen,” said Jim Stanford, economist and director of the Vancouver-based Centre for Future Work.

“Courts and labour regulators in many countries around the world are recognizing that and saying, no, just because you assign the work over a smartphone doesn’t mean they’re not your effective employee,” Stanford said.

Brandon Mundy, a delivery driver with Instacart, says the time it takes to buy groceries from a store, and then deliver them to a home, isn’t always translating into reliable profits these days. He said an oversaturated market and mitigating concerns like vehicle repair can make things more challenging. (Helen Pike/CBC)

Uber Canada previously referred CBC News to a proposal that would provide a benefit fund to workers, adding that the company attempts to prioritize “what drivers and delivery people want: flexibility plus benefits.”

Efforts by workers to secure more benefits have also led to certain app-based platforms reconsidering their availability within Canada.

In 2020, food delivery service Foodora announced it would leave Canada in the wake of workers attempting to unionize. 

Stanford said such moves suggested that business models of gig platforms depended on the “exploitation of gig workers.”

“That should really be a warning sign for us that this is not a business model that we should encourage in Canada. We have to make sure that they’re subject to the same rules and responsibilities as any other employer,” he said. 

“Otherwise, this cancer, which is spreading through the labour market, will continue to undermine wages and working conditions in all kinds of industries.”

Ontario’s recent proposal did not include everything the union-backed group Gig Workers United called for, including for gig workers to receive full employee protections.

In early December, the European Union announced draft legislation that would provide employee rights to gig economy workers, a move that would affect millions of workers.

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