By Jonnelle Marte

(Reuters) – The rapidly-growing Omicron version of COVID-19 is already affecting a portion of the U.S. economic system. Some events have been canceled, postponed or rescheduled and consumers have cut down on dining out at restaurants. In some areas of New York City that are most affected by the virus, understaffed businesses also shut down.

Although economists believe the variant will have a negative impact on economic growth, they warn it is too early to determine the extent of damage caused by the iteration. The virus may prove less deadly than the more transmissible versions in almost two years. At this point, it seems impossible to stop a second year of above-trend economic growth.

The U.K. government released preliminary data Thursday showing a 50% to 70% lower chance of Omicron infections resulting in hospitalizations than the Delta variant. This was in response to a Wednesday study from South Africa where Omicron infection was identified for the first time last month.

Mark Zandi is the chief economist at Moody’s Analytics (NYSE.) Analytics. He expects the U.S. to suffer a short-term hit from a surge of people that will infect more people and end faster than previous waves. Now, he predicts that the U.S. Economy will expand by 2% during the first quarter (2022), down from 5%.

“Omicron is already affecting people’s behavior and business practices,” said Zandi, pointing to a decline in credit card spending over the past several weeks.

The Federal Reserve reported that credit card balances decreased fractionally for the week ended December 8. This marks the first week since October when they’ve not increased over the course of a week.

The virus is causing consumers to cut back on their restaurant visits. OpenTable reports that the U.S. saw a 10% decrease in diners at restaurants during the week ended December 23rd compared to 2019, and this was despite the fact that there were still many places for them to eat. This is lower than the Nov. 25 level of dining activity, which was at par with 2019.

OpenTable’s chief executive Debby SOO stated that “the situation is rapidly changing” and that it was far away from the resurgence some restaurants were expecting on this holiday.

Other parts of the economy looked to continue running for now.

Last week’s unemployment benefit claims were lower than pre-pandemic levels. Although workplace activity was slightly lower than it had been in December after rising in December, this is in keeping with the trend and more robust when compared to last year. Dave Gilbertson vice president at UKG payroll management said that the decline in last week’s employment activity was similar to what we saw heading into the holiday season.

“So far, we haven’t seen widespread business shutdowns, and customer demand remains strong across industries,” Gilbertson said in an email.

Americans seemed to be more dedicated to holiday travel. Transportation Security Administration data shows that the volume of travelers who have been through airport security as they approach Christmas was almost double what it was last year. The Wednesday total exceeded that of 2019 by approximately 144,000 people. This is one of the few days in which the number of passengers has surpassed pre-pandemic levels, and the biggest margin of any day.

TOO EASY TO KNOW

Omicron may not have an immediate impact on economic results, according to some analysts.

Although consumer sentiment rose in December, Richard Curtin from the University of Michigan Surveys of Consumers stated that “too many interviews” weren’t done to measure the effect of Omicron.

Curtin released a statement Thursday saying that “Confidence is likely to drop in January but it’s too early to predict the impact of Omicron.”

Some economists are lowering their estimates of the U.S. economic growth and labor market’s potential for next year, amid an increase in infection rates and declining fiscal support.

Oxford Economics has reduced its projections of growth for next year from 4.4% to 4.1% due to the increase in infections. It also predicts that growth will slow to 3.7% if President Joe Biden’s Build Back Better spending program is blocked. Although the chances of this package passing have diminished after Senator Joe Manchin declared he wouldn’t support it, some analysts believe that a modified bill might be passed later.

Aneta Marcowska and Thomas Simons from Jefferies economists said earlier this week that economic activity will likely slow in January and they see “relatively high probability” the labor force could contract in February, as it did for December 2020, if businesses hire more people to help with the virus.

Biden this week announced that new measures were being taken to reduce the economic and health effects of the epidemic. These included new testing sites and more home rapid tests, as well as an extension of the suspension of student loan payments through May 1, 2022.

Zandi believes that, despite any slowdown in growth, the economy will rebound rapidly in the second quarter. The economy may expand just under 4% next year. It would nearly double the annual rate of growth in the decade preceding the pandemic.