The U.S. economic recovery is being threatened by the COVID-19 delta variant. Increasing vaccination rates is the most important thing the U.S. can do to sustain the economy over the next few months. Beyond that, however, full recovery might require creating new vaccines against delta and other emerging variants.
U.S. stock markets and Treasury yields took big dips in recent days before rebounding. Despite the bounce-back, the volatility is evidence that investors are worried about the health of the recovery. It’s not just markets, either — there are some concrete signs of economic weakness, such as a week with an unexpectedly high number of initial jobless claims. The lights aren’t flashing red yet, but these are clear warning signs.
The obvious reason is the delta variant of COVID-19. This variant, which is both more infectious and more resistant to vaccines than previous versions of the virus, has become the dominant strain in the U.S. As a result, cases are rising again. If the U.S. ends up looking anything like the U.K., the country is in for another big wave of disease.