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Biden's top economics advisor weighs in on how omicron is affecting economic recovery

DAVID GURA, HOST:

The spread of the omicron variant is casting a shadow of uncertainty on the fragile economic recovery in the U.S. and around the world. The unemployment rate is now at 4.2%, but millions of jobs that were lost at the start of the pandemic have not come back. And a big question for 2022 is if they will. Cecilia Rouse is President Joe Biden's top economic adviser, and she joins us now. Thanks very much for being here.

CECILIA ROUSE: It's a pleasure.

GURA: So as you watch the spread of this variant, I wonder how concerned you are about the effect it could have on the economy and economic recovery.

ROUSE: Well, look, you know, I think as you pointed out at the beginning, we've had an extremely strong recovery this past year in terms of, you know, 6 million Americans are back to work, unemployment is down to 4.2%. So we go into this new variant in a very strong position. We've always expected that there would be, you know, ups and downs along the progression, and we also knew that there would be new variants. I think what we're seeing so far is, you know, clearly it's been disruptive in a certain sense, with the numbers of cases just skyrocketing. But at the same time, the growing evidence is that it's not as severe as the prior variants. So what I'm expecting to see is we won't see, you know, the businesses needing to shut down. While I expect people will pull back some on their demand for in-person services, I can expect they'll continue to do so. So there will be a bit of a slowdown, but I don't expect we're going to be find ourselves in the same position as we were two years ago. We're just in a very different position.

GURA: Inflation continues to be a problem. The term transitory has been retired to describe the price increases that we've seen. How long do you expect this level of inflation to continue?

ROUSE: Well, you know, as we head into the new year, my crystal ball is still just a little cloudy. But, you know, most outside forecasters expect that inflation to subside over the course of this year and that this time next year, for example, will be about half of what we see it to be now. The reason is because the inflation rate really is tied to the pandemic and people's responses to the pandemic. So what we know is that instead of demanding in-person services, going out to restaurants, being in movie theaters or my personal favorite, getting massages, instead, people have bought goods. So the supply constraints have really been the source of the inflation, and we do expect all of that to ease in 2022.

GURA: You are a labor economist by training, and as the focus shifts to inflation more, there are still problems with and strange things going on in today's jobs market. I wonder how that complicates us getting back to full employment, what we're seeing in the jobs market right now.

ROUSE: When we look at those who are not yet back to work, what we see are those who elected to retire a little bit earlier than they might have decided. And importantly, when people retire, they may retire from their main job, but they often will go back and take another job, whether it's on the side or they just have a second career or third career. Second, we know that the impact on schools and child care centers has been profound for caretakers to come back. And now that schools are more likely to be able to operate safely, I think we're starting to see women come back into the labor market. Omicron may set that back at least temporarily, but we know we have to get that stabilized. I mean, there are - many people who are unemployed just cite concerns, health concerns as being a reason why they're not looking for a job. And so again, as we get to a different stage of this pandemic and people feel more confident re-engaging, I do expect that we will see a rebound.

GURA: There is a gap, as I see it, between the hard economic data we're seeing and softer statistics or measures of how Americans feel about the economy, their optimism about the economy. And I wonder what your message is to Americans who are worried or maybe are pessimistic about the future when it comes to the economy.

ROUSE: I think the American economy in particular is strong. It was strong before the pandemic started. There was room for improvement, which is why President Biden's Build Back Better plan is so important because we know that we can do better, we can have faster economic growth, and we can ensure that it is more evenly shared. However, the bones were good, and I fully expect that we will get back there. We are - again, we've had a spectacular recovery this past year, and I expect that to continue.

So, you know, in terms of the U.S. economy, we know that, again, unemployment is 4.2%. Forecasters are expecting that to continue to drop over 2022. Household balance sheets are strong. In the end, some of our supply chain challenges are that people have the resources to buy the goods that we are now struggling to get from point A to point B because actually the throughput, for example, in our ports is higher than it was pre-pandemic.

So, you know, on the economics, I think households are in fairly good shape. I don't want to say that everybody is. We know that there are those who are struggling. But on average, the economy is recovering, and it's recovering well.

GURA: Last question just about that uncertainty - when this crisis got started, I remember talking to economists, and I was impressed by their candor, their willingness to say, we don't really have models for this. We've never seen something like this before. There is so much uncertainty associated with a pandemic of this scale. And I wonder, as we go into 2022, how much lingering uncertainty there is just about the economic effects of this crisis.

ROUSE: I think there is much uncertainty about the lingering impacts, and I think this will - we will be studying this for years, if not decades to come. Data are just being collected. What we're learning is in real time, which mean the data are new and incomplete. And we will be studying the impact.

GURA: Cecilia Rouse is the chair of the White House Council of Economic Advisers. Thank you very much.

ROUSE: You are very welcome, and Happy New Year. Transcript provided by NPR, Copyright NPR.

Based in New York, David Gura is a correspondent on NPR's business desk. His stories are broadcast on NPR's newsmagazines, All Things Considered, Morning Edition and Weekend Edition, and he regularly guest hosts 1A, a co-production of NPR and WAMU.