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Whose narrative is that?

“The tragedy of the treadmill that’s delayed” ~ White House press secretary Jen Psaki

That's out of the fire and into the frying pan of inflation.

His agency itself, as of late, has been considered benign- until now.

At the same time, he is personally sitting politically pretty good right now (and much more so for his future once the infrastructure bill passes and there is money being spent in his post-Cabinet future).

So, when he is done after serving four years (or less) and the legal time limit expires, huge transportation and construction corporations will seek him to sit on their boards and lobby the federal government.

Pretty sweet to be Pete from the future personal enrichment perspective...

The Monetary Bathtub Is Overflowing
Many economists say inflation is transitory. It will be persistent.

WSJ
The consumer-price index has risen 5.4% over the past 12 months. President Biden says we are facing a temporary bout of price increases caused by supply-chain glitches and bottlenecks that are themselves temporary. But while supply-chain problems affect prices of specific commodities, they have little effect on the overall price level if monetary growth is stable. The problem is that monetary growth in the U.S. has been anything but stable.

“Inflation is always and everywhere a monetary phenomenon,” Milton Friedman said. Inflation isn’t caused by temporary supply-chain disruptions. Take Japan during the 1979-80 oil crisis: Oil prices surged, but consumer prices remained stable. In China today, raw-material prices are soaring, but consumer prices have hardly budged.

To explain what is happening in the U.S. economy, we present the bathtub theory of money and inflation. Money flows into the tub through the faucet. The bathtub has three drains.

One drains into economic growth—a k a growth in real gross domestic product. Another drains into money that the public wishes to hold relative to its income measured by the ratio M/Py, where M is the money supply, P is the price level, and y is real GDP. Nobel Prize-winning economist Lawrence R. Klein called this one of the five great ratios in economics. In noninflationary times, the inflow from the faucet roughly equals the outflow through these two drains. But if more money is flowing in than out, the level of money rises. It will eventually reach the overflow, which is the inflation drain. It usually takes about two years for any excess money to show up as inflation.

Let’s take a look at the U.S. bathtub. During the early months of the Covid-19 pandemic, the faucet was wide open. Between December 2019 and August 2021, the U.S. money supply, measured by M2, grew by $5.5 trillion, a stunning 35.7% increase in only a year and a half, driven primarily by the Fed’s purchases of Treasurys and mortgage-backed securities. In light of anticipated Federal Reserve tapering, we estimate that by the end of 2024 the money supply will grow another $5.1 trillion.

Out of the total $10.6 trillion in new money, real GDP growth will drain roughly $1.4 trillion. Another $1 trillion will flow down the money demand drain. Since the amount of money flowing into the bathtub far exceeds the two outflows, the excess money in the tub—around $8.2 trillion—will hit the inflation overflow drain.

The huge monetary expansion—$5.5 trillion already in the bathtub—is starting to reach the overflow. Persistent, not transitory, inflation will be with us for the next two to three years.

Yellen expects inflation to linger, then ease later in 2022
The most recent Consumer Price Index showed prices have gone up 5.4 percent in the past 12 months.

POLITICO
Treasury Secretary Janet Yellen said on Sunday that she expects higher inflation to linger for months, then ease by "the middle to end of next year."

"The Covid shock to the economy has caused disruptions that we'll be working through over the next year. And, of course, Americans have not seen inflation like we have experienced recently in a long time," Yellen said on CNN's "State of the Union." "As we get back to normal, expect that to end."

The most recent Consumer Price Index showed prices have gone up 5.4 percent in the past 12 months. Yellen also cited supply chain issues and worker shortages as a result of Covid-19 that has hampered the economy.

She named health and child care concerns as two reasons why "many firms are experiencing a shortage of labor." And shutdowns related to Covid-19 in Asia have impacted the import of good, she said, including a shortage in semiconductors that has pushed up prices of used cars and a reduction in the production of new cars.

"This is temporary pains that result from a Covid economy," Yellen said.

Still, the Treasury secretary said she expects conditions to improve and the supply bottlenecks to subside. And she credited the American Rescue Plan passed in March for giving Americans "enough income and support to get through this while still being able to put food on their tables and keep roofs over their heads."

"As we get beyond the pandemic, I expect labor supply to increase," Yellen said. "It's good, I think, to see wages begin to rise, especially for those Americans who had the most insecure jobs and the lowest wages. To see some improvement there is something we should be pleased with."

The Treasury secretary also reiterated the need for Congress to raise the debt ceiling. The U.S. is projected to default on its debt on about Dec. 3 unless Congress acts.

Yellen reiterated that a default would be "utterly catastrophic" and threaten the viability of America's assets, which she said are regarded as "the safest on the planet."

Yellen said she would leave it to House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer on how to raise the debt limit, adding it was her personal view that Republicans and Democrats share the responsibility.

Yellen also noted that raising the debt limit is about ensuring the U.S. can pay for its past spending and borrowing decisions, not future ones.

Earlier on the CNN show, Pelosi again appeared open to Democrats alone raising the debt limit through reconciliation if Republicans remained unified in opposition.

"That's one path," Pelosi said. "But we're still hoping to have bipartisanship."

Enough Republicans in the Senate supported temporarily raising the debt limit earlier this month to avoid the reconciliation process and ensure a default wouldn't occur until December.

Pelosi said failing to raise the debt limit could have "consequences that could last for decades," including millions of lost jobs. And she highlighted her grievance that most of this debt accrued under then-President Donald Trump and that Republicans raised the debt limit when he was president.

I am betting the farm there will be protracted increased inflation.

You know I really like you and will certainly miss you. Have always appreciated that you are true to your inner nature and not a cranky preaching whiner so I'm really happy you are able to make this happen.

That movie was funny, probably has elements that will always feel current politically. For a minute we were even on recommendations as I took yours and read the Frederick Douglass autobio not all that long ago...but now I have to find Twain's short story. Don't believe I have heard of it but your opinion is Platinum with me...

Hey, maybe if Biden's stuff goes through you'll have internet soon. Fingers crossed...HA!

don't recall doing anything for you, but one last reco...The Whore of Mensa.
Short story by Woody Allen, but you have to read it while "hearing" Phillip Marlowe as the narrator.

You always took up for me when I was the RayRay of the forum. You know, like 3 of the first 4 yrs that I was here. Lol

just trying to be true to my inner nature, buddy.

Don't denigrate yourself by unworthy comparison.
Be well on your journey to a new lifestyle!

That's right Robert, you don't want to be compared to me...I'm an EXTREMIST!

This was really good, too short but good.

Peter Schiff Debates Two Socialists on Debt Ceiling

https://youtu.be/ZsDsJBtLb1g

Global Chip Shortage ‘Is Far From Over’ as Wait Times Get Longer

Nearly a year into the crisis, some customers are finding it is taking months more than expected to get needed parts

WSJ
Almost a year into a global chip shortage, the problems are increasing for many customers as delays get even longer and sales are lost.

Manuel Shoenfeld placed an order in May for transmission chips for the utility-monitoring devices made by his New York-based firm PowerX. He was told the chips would arrive by summer, then fall, then winter and now doesn’t expect to get them until May 2022.

“This is far from over,” Mr. Shoenfeld said.

The global semiconductor shortage is worsening, with wait times lengthening, buyers hoarding products and the potential end looking less likely to materialize by next year. Demand didn’t moderate as expected. Supply routes got clogged. Unpredictable production hiccups slammed factories already running at full capacity.

What’s left is widespread confusion for manufacturers and buyers alike. Some buyers trying to place new orders are getting delivery dates in 2024, said Ian Walker, operations director at electronic-components distributor Princeps Electronics Ltd., which helps companies find chips.

“It really feels as if we are running out,” Mr. Walker said.

The $464 billion semiconductor industry has been unable to keep pace, leading to lost revenue across the board. The pain is spreading beyond the initially affected—like car makers and home appliance manufacturers—to producers of other products, including medical devices and tobacco. The smartphone industry will grow by just 6% year-over-year, or half the initial forecast from earlier this year, because of chip woes, according to Counterpoint Research, which tracks handset shipments.

Chip makers say the lack of supplies have caused them to lose sales. “Trust me, we would be shipping a lot more if we weren’t constrained by the supply chain of these other components in the industry,” Intel Corp. Chief Executive Pat Gelsinger said last week on the company’s earnings call. Mr. Gelsinger has said he expects shortages to last until 2023.

Wait times for chip deliveries have continued to climb above a healthy threshold of 9-12 weeks. Over the summer, the wait stretched to 19 weeks on average, according to Susquehanna Financial Group. But as of October, it has ballooned to 22 weeks. It is longer for the scarcest parts: 25 weeks for power-management components and 38 weeks for the microcontrollers that the auto industry needs, the firm said.

Scott Wren, senior global equity strategist at Wells Fargo Investment Institute, said he would have thought six months ago that chip shortages would start easing by this time. But now he said they will likely last until 2023. Wells Fargo Investment Institute recently revised down its U.S. GDP forecast to 6.3% from 7% as the chip shortage limited the supply of consumer goods.

“This is playing out considerably longer than we initially thought,” Mr. Wren said.

A supply bounceback this year relied on rosy assumptions that already maxed-out production wouldn’t face further setbacks. But the chip-making process is under duress from beginning to end.

Basic building-block materials such as substrates are in short supply. Mishaps from bad weather and fires have interrupted wafer production. The final stage of manufacturing has been undercut by virus outbreaks and subsequent factory closures in Malaysia, which specializes in product packaging.

Global shipping constraints have added to disruptions and delays. Chip assembly can require that parts travel up to 25,000 miles before becoming finished products, according to a report by Accenture and the Global Semiconductor Alliance.

Sourcing chips has turned almost into a lottery, leading to over ordering that creates more supply strain, industry experts say. “People are buying a lot of parts to have just in case, and that’s exacerbating the shortage,” said Willy Shih, a professor of management at Harvard Business School, who specializes in semiconductors and supply chains.

A decline in car buying, for lack of cars, was the quarter’s biggest economic hitch.

WSJ
To understand how supply-chain woes are holding back the economic recovery, look no further than auto sales.

Spending on motor vehicles and parts, adjusted for inflation, fell 17.6 percent in the third quarter, according to the government data released Thursday. The problem wasn’t that Americans didn’t want cars — it was that dealers didn’t have enough to sell them. A global shortage of computer chips led to a slump in auto production, which in turn led to a slump in sales.

When consumers can find cars to buy, they are paying more for them. Total spending on motor vehicles, not adjusted for inflation, fell 13.5 percent — still a big drop, but not quite as big as the inflation-adjusted figure. In other words, consumers were getting less for their money.

The drop in car production was big enough to drag down overall economic growth for the quarter. Gross domestic product would have risen 0.9 percent in the third quarter had it not been for the slump in auto output.

Supply-chain issues have been particularly acute in the auto sector, but they are much broader than that. Spending on other long-lasting goods also fell.

“It’s not just in autos,” said Robert Rosener, senior U.S. economist at Morgan Stanley. “There are other consumer goods that are also in short supply.”

The snarled supply chain is partly a result of the surge in spending on goods during the pandemic, as Americans bought cars instead of plane tickets, workout equipment instead of gym memberships and cooking equipment instead of restaurant meals. Those patterns have begun to reverse as the pandemic has ebbed, but not all the way. Spending on goods remains far above its prepandemic level, while services spending, adjusted for inflation, had yet to return to its prior level in the third quarter.

The spread of the Delta variant has slowed the service-sector rebound. Spending at hotels and restaurants rose just 3 percent in the third quarter, down from nearly 14 percent in the second quarter, adjusted for inflation.

When Will the Supply-Chain Strains Finally Ease?

Many companies are resetting strategies to plan for long-term stresses

Opinion: WSJ
Companies that have been scrambling to get goods into stores and distribution centers by the end-of-year holidays are now starting to take a longer view on when the gridlock that has tied up their supply chains might finally end.

It is a crucial question for retailers and manufacturers planning out capital spending, purchasing and production strategies for next year. Comments from corporate executives on recent quarterly earnings calls and interviews with logistics experts suggest expectations for relief increasingly are being pushed deep into 2022 and even beyond.

Large numbers of companies pointed to supply-chain constraints as a drag on earnings. There are growing signs that issues like port congestion, the difficulty in getting truck drivers, slowing supplier deliveries and rising costs for raw materials and components such as semiconductors are affecting the broader economy.

Companies including Clorox Co. , Majestic Steel USA, water heater manufacturer A.O. Smith Corp. and apparel retailer Under Armour Inc. are undertaking changes in operations and sourcing that will last past the current bottlenecks, signaling that stopgap measures responding to raw materials shortfalls and transportation logjams are being embedded into ongoing operations.

“We feel that the supply chain constraints will continue to be in the market all the way to the second half of calendar year 2022 before we see them abating,” Tarek A. Robbiati, finance chief at information technology company Hewlett Packard Enterprise Co., said at an Oct. 28 analyst meeting.

Under Armour says it has narrowed its spring and summer 2022 order book. “We are taking precautions to navigate some of the volatility and anticipated business disruptions in the first half of 2022,” David Bergman, chief financial officer of Under Armour, said during an earnings call Tuesday.

Consumer-goods suppliers have trimmed product lines to simplify manufacturing and keep goods moving and are expanding their sources of raw materials. Larger industrial manufacturers are resetting assembly lines to make them more resistant to the sort of outages that have hit the automotive sector, where several companies say they now expect the semiconductor shortage to affect their production into 2022.

Ford Motor Co. is “designing for much more interchangeability, fungibility,” and ensuring it has multiple sources for components, said Hau Thai-Tang, its chief product platform and operations officer, during a Monday investor meeting.

Logistics experts say the interconnected nature of supply chains means there is no quick fix to resume the steady flow of goods through the global economy.

“We’ve been looking at no relief coming until the end of the 2022 calendar year,” said Sarah Banks, global lead for freight and logistics at consulting firm Accenture PLC. “But the continuing issues in supply chains raise the question of whether that is still possible. There are some positive signs, but it’s still a guess how long we will be in this situation.”

She said unwinding the supply-chain snarls will depend at least in part on addressing the impact of Covid-19 on the economy and on operations from factories to port docks.

“There are bigger economic questions that dictate supply and demand,” Ms. Banks said. “Only until it becomes clear how we live our lives with Covid will we know what it looks like for supply chains,” she said.

Lisa Ellram, a professor of supply chain management at the Miami University Farmer School of Business in Oxford, Ohio, said supply chain operations could be closer to normal by the fall of next year. But because of the continuing potential for shutdowns and other pandemic impacts, she said, “I do think Covid is the big wild card.”

Operators in supply chains say the congestion will remain until there are enough workers for trucking, port and warehouse operations.

“I won’t try to prognosticate when and how this ends, but I do believe that it’s going to extend for quite some time,” Bob Biesterfeld, chief executive officer of C.H. Robinson Worldwide Inc., the largest U.S. freight broker, said on the company’s third-quarter earnings call last week.

#winning!

The Biden administration is a terrorist organization.

"It is the Left that is cruelly regimenting, corralling and impoverishing the populace; it is the Left which brooks no appeal to humanity or common decency. It is the Left which seeks power, as an end in itself – no matter the human debris left in its awful wake."

Shut Down Joe

By eric -November 10, 2021

Who’s to blame for inflation?
NYT
The rising prices of food, gas and other things we buy — in other words, inflation — were already a central economic issue of 2021. Those prices are up 6.2 percent over the last year, and shortages and other inconveniences are side effects of the problem.

Now inflation is also a central political issue. It is dragging down President Biden’s approval ratings and fueling discontent among Americans. It’s clear in surveys. It will surely be the talk at the table of Thanksgiving family gatherings next week (even if, as an economics writer, I might prefer to skip one day of talking about supply chain mechanics).

How did we get here? Who is to blame? To help you understand, today I’ll walk you through the most obvious candidates — and where the evidence looks strongest.

President Biden
Presidents have less control over the economy than headlines might suggest, but the current situation is an exception to the rule. You can draw a direct line from a specific policy decision that Biden and congressional Democrats made this past winter to some of the inflation happening now.

In designing the stimulus that Congress passed in March, Biden’s administration went big, with $1.9 trillion in pandemic relief — on top of a separate $900 billion package that passed three months earlier. Put the two together, and $2.8 trillion in federal money has been coursing through the economy this year while economic activity has trended only a few hundred billion dollars a year short of what mainstream analysts would consider full health.

If you think of inflation as a result of too much money chasing too few goods, then this extra spending is most likely a culprit.

But for all the trillions spent, Americans’ purchases through the end of September were only about $52 billion higher — or 0.4 percent — than would have been expected in a world where the pandemic never happened. I take that as evidence that most of the spending served to replace lost incomes (from people not working, voluntarily or otherwise) or was plowed into savings, and the inflation story is more complicated than just too much money floating around.

The Fed
The nation’s central bank has kept ultra-easy monetary policy in place for far longer than in past economic cycles. Its chair, Jerome Powell, has focused on returning the job market to full health and has projected that the inflation surge is temporary.

His response in large part took from the lessons of the last economic expansion, when the Fed started raising interest rates at the end of 2015 and, with hindsight, might have excessively crimped a recovery that was only starting to show big benefits to workers.

But Powell and other policymakers might be fighting the last war. At a minimum, the Fed has not played its traditional role of pre-empting an inflation surge by deliberately slowing the economy.

That said, monetary policy takes a long time to affect consumer prices, so it’s not a given that the inflation situation would be terribly different now if the Fed had started raising rates already.
Corporate America

When the pandemic shut down the world in 2020, operations managers at companies concluded: We need to do whatever we can to survive.

Automakers saw it as a severe recession and cut back production and orders for new supplies, while car rental companies sold their fleets. Airlines canceled orders for new jets. Energy companies canceled drilling projects. Companies in a range of industries laid off workers.

We’re still dealing with the effects of those decisions. This turned out to be a much shorter economic downturn, with a much speedier recovery, than many people were forecasting in the spring of 2020. So now, automakers are wishing they hadn’t canceled orders for semiconductors, car rental companies are struggling to add vehicles, shipping prices are through the roof, fuel prices are spiking, and companies are wrestling with labor shortages.

What seemed like prudent, sensible decisions turned out to be wrong for the actual economy we ended up with.

Despite all that, however, supplies of many goods actually are higher than they were before the pandemic. The problem is that demand is up even more.

Though everybody experienced the pandemic differently, in the aggregate a couple things are true.

We shifted our spending toward stuff, rather than services. Americans purchased 18 percent more physical goods — cars, washing machines, furniture — in September than they did in February 2020, while their consumption of services fell a bit. Because demand for such goods is off-the-charts high while supplies are limited, they are more expensive.

And many of us elected to stop working, or work less. (The number of people working remains smaller than it was prepandemic.) The shortage of workers has led employers to offer higher wages to attract employees. That fuels price increases even in services experiencing underwhelming demand, like restaurant meals.

The takeaway
The great shift in Americans’ purchasing and employment patterns prompted by the pandemic look like the primary culprit in this bout of inflation. Decisions by Biden and the Fed likely contributed, and earlier decisions in the corporate world made it harder for supply to adjust to match surging demand.

In assessing blame for the wave of inflation, the biggest question is whether policymakers should have foreseen the problems around reopening — and perhaps been more restrained in trying to stimulate the economy.

That means the future of inflation depends not just on what happens in Washington, but on what happens with the pandemic — and how quickly Americans return to more typical spending patterns and more people go back to work.

**Hoping** for a quick truce.

The Slow Meltdown of the Chinese Economy

Beijing’s troubles are an opportunity for the U.S.—if Washington can recognize it.

WSJ Opinion
China is experiencing a slow-motion economic crisis that could undermine stability in the current regime and have serious negative consequences for the global economy. Despite the many warning signs, Western analysts and policy makers are optimistic that Xi Jinping is up to the task of managing the crisis. Such optimism is misplaced.

The U.S. and its allies have many tools to influence China’s economy and need to weigh the consequences of an acute crisis against the threat its current trajectory poses to the U.S. Policy makers should be thinking of how best to deploy these tools, instead of passively assuming the rapid growth and stability of the Chinese economy will continue.

In December real-estate developers China Evergrande and Kaisa joined several other overleveraged firms in bankruptcy, exposing hundreds of billions in yuan- and dollar-denominated debt to default. Real estate represents around 30% of the Chinese economy, nearly twice the levels that led to the financial crisis of 2008-09 in the U.S., Spain and England.

The real-estate industry has been key to keeping annual growth above 6%. Yet a debt bubble has inflated by 20% annually between 2014 and 2018. Originally intended to accommodate rapid urbanization for the industrial economy, the urban property market is now overbuilt. Some 90% of urban households own their own properties and enough vacant units are available to accommodate 10 years of urban immigrants. Sales and prices have tumbled this year, and overleveraged builders and creditors are suffering the consequences.

After a major change in how central and local governments divvy up tax revenue in 1994, Chinese local officials began to rely on land sales for the income needed for improving infrastructure and social welfare. At a minimum, one-third of local government revenues is derived from land sales. Another 10% to 15% come from related taxes on development.

But land sales fell by more than 30% in late 2021, putting local finances in jeopardy. Local governments have struggled to address other priorities such as healthcare, pensions, environmental cleanup, income inequality and education. Moreover, up to 80% of household wealth in China is in real estate holdings, a hedge against weakness of the social safety net. In other words, an economic meltdown is a potential threat to the implicit social compact in China between authoritarian rulers and a quiescent population.

In his zeal to reassert the dominance of the Chinese Communist Party, Mr. Xi has engineered a crackdown on some of China’s most innovative industries and the entrepreneurs building them. The party channels credit to state-owned enterprises to the detriment of the more dynamic and job-creating private industry, inserts operatives on the management committees of most enterprises, and disciplines business leaders perceived to resist Mr. Xi’s leadership. The clampdown on new industries such as ride-sharing, private education, social media and online and private healthcare, is especially damaging to growth.

Mr. Xi is privileging the less productive and less innovative components of the Chinese economy while enhancing control, limiting financing and punishing entrepreneurial leaders in many leading industries. This isn’t a recipe for maintaining strong economic growth. Despite the frequent assertions that China is catching up or moving ahead of the West in technology industries, it has a long way to go to achieve the self-sufficiency and global leadership it seeks. U.S. sanctions on advanced semiconductors, for instance, have gutted Huawei’s ability to make its own 5G phones. China’s semiconductor industry is 10 years behind world leaders, according to a recent German study.

China’s commercial aviation industry doesn’t have an internationally certified jet to compete with Boeing and Airbus, despite three decades of concentrated efforts. Its biopharmaceutical industry failed to produce an effective vaccine for Covid. Steel, batteries and high-speed rail—where China is competitive—are at risk of trade retaliation due to environmentally harmful production practices and theft of intellectual property. China’s alleged lead in artificial intelligence could be blunted by imposing the same limits on data flows into China that it imposes internally, thus sapping its monopoly on big data, and by limiting U.S. investment in Chinese AI firms.

China’s overall productivity levels also lag those of other advanced economies. Mr. Xi’s turn to state-owned enterprises and manufacturing certainly won’t improve this relative weakness.

In short, it is difficult to escape the conclusion that China’s economy is systematically weakening and that Mr. Xi’s new priorities offer little hope for a quick turnaround. The U.S. and its allies could further compound Mr. Xi’s challenges by vigorous enforcement of trade laws, limiting Chinese access to technology and financing from the West, and imposing sanctions against China’s brutal human-rights abuses in Xinjiang and in countries in the developing world that it is trying to exploit through its Belt and Road Initiative. A good example of such exploitation is the atrocious mining conditions for key battery components cobalt and lithium in Africa and South America.

A major slowdown or acute financial crisis in China would certainly have a negative impact on the global economy. But U.S. and allied policy makers do have tools that could both influence the direction of the Chinese economy and help repair some of the accumulated damage to their economies from Chinese mercantilism. A first step is to undermine the narrative of a relentless, unstoppable economic advance under Mr. Xi’s leadership.

Mr. Duesterberg is a senior fellow at the Hudson Institute and author of a new study, “Economic Cracks in the Great Wall of China: Is China’s Current Economic Model Sustainable?”

I only own two stocks individually. From my working days Motorola and On Semiconductor . Looks like they’re going to finish up about 50% and 100% for the year. That Biden is a genius!

Omicron Variant Is Expected to Dent Global Economy in Early 2022
Economists have lowered growth forecasts for early next year, citing disruptions from the latest Covid-19 surge

WSJ
A winter surge in Covid-19 cases driven by the Omicron variant is prompting economists to downgrade U.S. and global growth expectations in the early part of 2022 as businesses struggle with absenteeism and consumers stay home to avoid getting sick.

Several economists have recently cut forecasts for the U.S. following early signs that a sharp rise in cases has already disrupted parts of the economy. Airlines canceled thousands of flights over the Christmas holiday weekend and into Monday, in part due to Covid-19-driven staff shortages.

The federal Centers for Disease Control and Prevention reduced on Monday the amount of recommended time that infected people who are asymptomatic should isolate to five days from 10 as more research is done and thinking evolves on how best to manage the pandemic.

In Europe, leaders reviewed whether to put in place new limits on activity as New Year celebrations approach. The U.K. government decided against tightened restrictions after reviewing hospitalization data, but Health Minister Sajid Javid said people should celebrate New Year’s Eve outside if possible.

U.S. officials are seeking ways to ease pressure on hospitals while also limiting business disruptions.

Mark Zandi, chief economist at Moody’s Analytics, downgraded his first-quarter U.S. gross domestic product forecast to 2.2% growth from 5.2% as he “can see the economic damage mounting going into the first quarter.”

Mr. Zandi pointed to softer spending on travel and cancellations of sporting events and Broadway shows due to the disruptive Covid-19 outbreak.

“It feels like a very similar dynamic as when Delta hit,” Mr. Zandi said, referring to the Delta variant of Covid-19 that gripped the U.S. in the summer. He initially expected economic growth of 6.1% headed into the third quarter; in the end the economy expanded at a 2.3% pace from July to September.

The economy is estimated to have grown at an annual pace of 7.6% in the current fourth quarter, according to the Federal Reserve Bank of Atlanta’s GDP forecasting tool.

Economists have struggled to predict the impact of Covid-19 on economies throughout the pandemic, including in the U.S., where changes in the labor market have surprised both the government and forecasters. Still, they expect Omicron will push economic activity from the first quarter into the second, with a smaller impact than from prior waves of the pandemic. The Federal Reserve earlier this month forecast that the U.S. economy would grow by 4% next year.

U.S. retail sales rose 8.5% between Nov. 1 and Christmas Eve compared with the same period last year; shoppers in Gurnee, Ill.

“Broadly speaking, each new wave is going to do a little less damage than previous waves,” said Mr. Zandi, adding that healthcare providers have gotten better at treating the virus and businesses are getting better at adjusting.

Credit- and debit-card data from JPMorgan Chase indicate that spending in services-related categories such as airlines and restaurants remained depressed last week. Now, the surging Omicron variant is “going to change people’s behavior at the margin” and crimp demand for the spending on services that makes up a large slice of economic growth as people stay home, said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Many food manufacturers, meanwhile, are planning price increases again in 2022, as inflation reaches levels not seen in decades.

Pantheon Macroeconomics recently cut its forecast for U.S. growth to 3% annualized in the first quarter of 2022 from 5%. Other economists are voicing concerns about downside risks to their existing projections.

“It’s unfortunate [the Omicron variant] had to break out during the holiday season, even in places like New York City, where people are highly vaccinated,” said Pooja Sriram, U.S. economist at Barclays. She hasn’t lowered her forecast for growth in the first quarter but said she is keeping a close eye on the outbreak.

While the U.S. isn’t imposing shutdowns, “we see some kind of voluntary social distancing if people start canceling travel plans and become hesitant about using accommodation, that will have an effect on growth and employment,” Ms. Sriram said.

The Biden administration’s top medical adviser, Anthony Fauci, in an interview with MSNBC on Monday, urged U.S. officials to consider requiring a Covid-19 vaccine for domestic air travel.

For Natalia Arbelaez, the rise of Omicron was the final straw of the pandemic for her playground business. Over seven years, Ms. Arbelaez built up Busy Bees, a popular chain of three indoor playgrounds in the Washington, D.C., suburbs catering to children. Despite raising wages to $15 an hour earlier this year, she said she has struggled to find enough workers, forcing her to close one location in June.

What’s After Omicron? How Scientists Hunt for New Coronavirus Variants
Scientists are using automation, real-time analysis and pooling data from around the world to rapidly identify and understand new coronavirus variants before the next one spreads widely. Photo Illustration: Sharon Shi
Now, the new variant has led customers to cancel birthday-party reservations, making it impossible to keep the other two locations open, she said. Busy Bees will close permanently on Jan. 1.

“I fought hard since March 2020 and here we are, almost January 2022,” she said. “Even though I am very sad I feel lighter. I was carrying a lot of weight on my shoulders.”

Earlier this month, the chief economist of the Organization for Economic Cooperation and Development warned that should the Omicron variant sidestep existing vaccines, the world economy could face a sharper slowdown than previously expected.

In the U.K., record infections ahead of Christmas put pressure on Prime Minister Boris Johnson to bring in more stringent measures to ease pressure on hospitals. But Mr. Johnson, who faces resistance to tighter restrictions from within his party, said there wasn’t enough information about the new variant to justify imposing them before Christmas. Current government guidance in England is for people to work from home and avoid unnecessary social contacts. In Scotland, Northern Ireland and Wales, limits have been placed on social gatherings and mass events as Omicron spreads.

Still, the new variant pushed many Britons to stay home over the festive period, prompting businesses to seek economic aid. Last week, the U.K. Treasury offered grants of up to £6,000, equivalent to about $8,065, to businesses in the hospitality sector.

Recent spending data suggest the rise of the Omicron variant could be causing people to curtail spending outside the home. Restaurant visits in December have slipped as more people stayed home. For the week ended Dec. 26, the number of seated diners in U.S. restaurants was down 27% from 2019 levels, the widest gap since April, according to data from OpenTable.

In-store spending at retailers and restaurants also fell in late November and early December. For the week ended Nov. 30, spending was down 5.3% from the previous week. For the week ended Dec. 7, it was down 5.6% before rising 3.4% in the week ended Dec. 14, according to payment-card spending data tabulated by the Commerce Department.

The Omicron outbreak is sending employees home sick amid a staffing crunch that has led employers to cling to workers. Filings for unemployment benefits hovered at the lowest level in more than half a century the week ended Dec. 18.

Still, consumer demand for gifts remained healthy in the run-up to the holiday season. Americans spent at a brisk pace over the shopping season, amid an early rush to stores due to worries about Covid-related supply and delivery problems.

U.S. retail sales rose 8.5% between Nov. 1 and Christmas Eve compared with the same period last year, according to Mastercard SpendingPulse, which tracks sales in the Mastercard payments network coupled with survey-based estimates for cash and checks.

For now, economists expect the highly contagious Omicron variant to cause a short-term soft patch for U.S. spending and broader economic growth. It comes as central banks across the globe tee up expected interest-rate rises next year in an effort to tame inflation. The Federal Reserve has set the stage for a series of increases beginning in the spring.

Record 4.5M quit jobs in Nov., report says

Associated Press
WASHINGTON — A record 4.5 million American workers quit their jobs in November, a sign of confidence and more evidence that the U.S. job market is bouncing back strongly from last year’s coronavirus recession.

The Labor Department also reported Tuesday that employers posted 10.6 million job openings in November, down from 11.1 million in October but still high by historical standards.

Employers hired 6.7 million in November, up from 6.5 million in October, the Labor Department said Tuesday in its monthly Jobs Openings and Labor Turnover Survey.

Nick Bunker, research director at the Indeed Hiring Lab, noted that quits were high in the low-wage hotel and restaurant industries. “Lots of quits means stronger worker bargaining power which will likely feed into strong wage gains,” he said. “Wage growth was very strong in 2021, and ... we might see more of the same in 2022.”

Still, the Labor Department collected the numbers before COVID-19’s omicron variant had spread widely in the United States.

“While each successive wave of the pandemic caused less economic damage, there is still a risk to the labor market from the current surge of cases,” Bunker said.

The job market is rebounding from last year’s brief but intense coronavirus recession. When COVID-19 hit, governments ordered lockdowns, consumers stayed home and many businesses closed or cut hours. Employers slashed more than 22 million jobs in March and April 2020, and the unemployment rate rocketed to 14.8%.

But massive government spending — and the rollout of vaccines — brought the economy back.