The Great Omicron Sickout: Millions Of Unwell Americans Causing “Hellacious” Worker Shortages

Record spikes in Covid-19 Omicron cases across the country are causing a nationwide worker “sickout,” as businesses from airlines to grocery stores are suffering from disruptions, even though the new variant is markedly far less severe – yet far more transmissible – than prior strains.

According to Delta Airlines CEO Ed Bastian, the past few weeks have been “hellacious,” adding that around 10% of his workforce, or 8,000 of his employees, have contracted the virus in the past month. The shortages contributed to over 2,200 canceled Delta flights since December 24.

Although a precise count of the number of employees who are out sick or quarantining is hard to come by, about 5 million Americans could be isolating due to COVID-19 at the peak of Omicron, according to Andrew Hunter, senior U.S. economist at Capital Economics. That could reflect about 2% of the nation’s workforce forced to stay home due to illness, he added.

Some employers report taking a harder hit. Stew Leonard Jr., chief executive of supermarket chain Stew Leonard’s, said about 8% of his staff was out sick or quarantining last week. That affects what shoppers find on store shelves. –CBS News

“That’s the highest we’ve ever had,” said Leonard Jr. “What we are doing is the same as every other business — you have to limit your product line.”

“Like I talked with my bakery director, and she said, ‘I make a great crumb cake, and I also make a great apple crumb cake, but when I’m short on people I’m not able to make the apple crumb cake.’ You’ll get crumb cake, just not the apple crumb cake.”

As we noted earlier this month, Omicron poses a major risk to Fed confidence about reaching maximum employment relatively soon.

It’s even more obvious now that the CDC’s revised December quarantine guidance from 10 days to 5 days (as long as symptoms aren’t getting worse) was likely to grapple with Omicron’s impending wave of sick-outs.

TD’s Priya Misra predicted the pain – writing that the near certainty of the first rate hike in March is “very aggressive,” adding that “the spike in infections should have a modest negative impact on the economy, and signs of slowing Q1 growth could be enough for the market to push out the start of the hiking cycle. This should help pull 2y yields lower in the near-term.”

And as BofA chief economis Ethan Harris pointed out, “the challenge with Omicron is the dramatically higher case load, adding that a quick back of the envelope calculation illustrates the kind of labor shortages this could trigger.

Suppose that every infected person on average causes themselves and two other people to quarantine for five days. That means at the peak of omicron wave 30mn (= 2mn * 3 * 5) could be quarantined per day. Of course, many of these people either don’t work or can work from home. Roughly half of the population work and among them, according to a Gallup poll, about 30% always work in person. This suggests that 4.2 million (= 30 mil * 0.5 * 0.3) in-person workers per day will be absent due to quarantining. This number could be too high or too low, but a multi-million number seems very likely.

As we wrote at the time: “These calculations underscore not only that the US labor market problem is about to get much, much worse, but that the well-advertised worker shortages in the airline industry are not an isolated problem. Generally speaking these absences will not show up in official estimates of labor supply—if you are home sick, you are still employed. Nonetheless, they add (temporarily) to the record 11 million job openings.”

At present, Covid cases are averaging nearly 1 million per day nationally based on a seven-day moving average reported by CBS News – the highest number since the pandemic began. The number is undoubtedly higher, of course, as milder Omicron symptoms combined with a shortage of testing means that cases are potentially vastly understated. That said, deaths have continued to remain remarkably low.

Last week, one CEO of a consumer packaged goods company said that they were cutting production lines by 20% to adjust to the high numbers of absent workers, according to Consumer Brands Association spokeswoman, Andrea Woods, citing an off-the-record call.

About 75% of consumer packaged goods companies in a recent survey said they had experienced an increase in absenteeism due to positive COVID-19 tests or exposure to someone with the virus, Woods added. -CBS News

“We are still dealing with a massive driver shortage — 80,000 and counting — with one truck available for every 16 loads. Omicron only intensifies that problem,” said Woods. “Absenteeism in warehouses is resulting in late shipments, and retailers don’t have the employee base to restock shelves.”

That said, Omicron worker shortages may be over as quickly as they began…

Jan. 13. Lower again pic.twitter.com/HngIA1SUfT

— tae kim (@firstadopter) January 15, 2022