Business

Will the delta variant put a strain on the rebounding economy?

Currently, Brighton Beach has a 3.7% positivity rate, one of the highest rates in New York City.
A COVID-19 testing site offers screening to residents of Brighton Beach, Brooklyn, on July 22, 2021, in New York City. The historically Russian neighborhood has experienced a rise in COVID-19 cases in recent days. Getty Images

There was no news conference or conference call. There was no press release or CEO interview.

Instead, it was a short regulatory filing with the Securities and Exchange Commission. On Wednesday, Southwest Airlines alerted investors that fewer people were buying tickets to travel soon. More people also were canceling trips on their calendars in the weeks ahead.

The airline thinks the slowdown is “driven by the recent rise in COVID-19 cases associated with the delta variant.” A week earlier, another carrier, Frontier Airlines, blamed the delta variant for a similar slowdown in flight ticket sales.

Anyone traveling by air this summer knows how busy the airlines have been. Fliers have crowded back into planes so fast that some carriers have had trouble finding enough equipment and people to handle the demand.

Southwest returned to profitability in July, but it warned that the fast-spreading delta variant will “make it difficult” to operate in the black during August and September. The news did not hurt shareholders when it was released — Southwest’s stock traded higher the same day it disclosed the delta ding.

Still, the disclosures are tacit acknowledgment and stark reminder that the economy still is dependent upon the virus.

Last month, Federal Reserve Chairman Jay Powell observed that throughout the pandemic, “successive waves” of the virus have tended “to be less economic” in their impact. He noted the vaccine has changed attitudes and “we’ve kind of learned to live with” the coronavirus.

Delta is testing that.

Thus far during the delta outbreak, the stock market has remained convinced this variant will not have any meaningful economic or business impact. But infections and hospitalizations continue rising. Schools are restarting. Travel plans are changing. And economic growth forecasts have been reduced.

In the week ahead, investors will be listening to see if more companies turn cautious as this coronavirus strain keeps spreading.

Tom Hudson hosts “The Sunshine Economy” on WLRN-FM, where he is the vice president of news. Twitter: @HudsonsView

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