As omicron wanes, NJ businesses struggle with inflation

The worst of the omicron winter has, by most accounts, passed for New Jersey. At the variant’s peak in December and January, business owners said that patronage dropped off, but activity has since bounced back. Now, they have bigger problems: higher costs and few workers.

“People were still a little nervous after New Year’s — but business picked up a lot now,” said Travis Semblewski, owner of Vic’s Italian Restaurant in Bradley Beach, a suburban Jersey Shore community. The omicron variant, in his view, “definitely had no long-lasting repercussions” for his business.

Others like Max Violla, the owner of Pearl Restaurant in downtown Ridgewood in North Jersey, largely agreed — at most there was a three-week window which overlapped with Christmas and New Year’s during which there were far fewer customers than usual. “But we’ve rebounded,” Violla said.

While data is still being compiled on employment trends, consumption and spending during December and January, early assessments suggest a muted impact. Better yet, said Robert Scott, an economist at Monmouth University, the end of school mask mandates and the onset of warmer weather “should give people confidence going into the spring that omicron is subsiding.”

New Jersey lost nearly 760,000 jobs in March and April 2020, after Gov. Phil Murphy ordered sweeping business closures. Since then, New Jersey has recovered jobs at a much slower rate than other states.

Unemployment in New Jersey was above 7% for most of 2021, only falling below the benchmark in the winter and hovering in the 6% range during the holiday shopping season. On the other hand, retail sales rose 3.8% in January, according to the U.S. Census Bureau, beating economists’ more modest forecast of 2%.

“The expectation was that jobs would take a big hit, and you will have some slowdown in the economy,” said Olu Sonola, an analyst with Fitch Ratings. But hiring picked up more quickly than expected in December, Sonola said, and nationwide consumer spending stayed strong for the holidays, only dipping during the month of December.

“You can come to the conclusion that omicron was around for about a month, but the negative impact was largely subdued,” he said. “You just didn’t see the same kind of negative economic impact that you saw with prior waves.”

Moody’s Analytics, in its New Jersey report for January, also noted that the Garden State’s economy “picked up pace” despite the omicron variant having “dented some optimism.” Hiring quickened in late 2021, as the restaurant and tourism industries began to rebound, the report said.

Until those sectors and others like hotels recover in earnest and hit pre-pandemic levels — something not expected to happen until as late as the middle of the decade — employment will continue to lag in the New York City area, Sonola said.

During an unseasonably warm President’s Day on Feb. 21, when many people had time off from work, patrons flocked to restaurants and other outdoor businesses. The combination of staffing shortages, shipping snags, and the rising cost of goods, helped create a perfect storm for businesses.

“We were to some extent unprepared,” said Tim McCloone, owner of McLoone’s Restaurants, which operates several eateries along the Jersey Shore. “Monday, we got clobbered.”
Certain wines were in short supply, and the costs of raw goods like steak or lobster rose significantly. “The complaints are always the same – we understand prices have gone up but why have your prices gone up?” McLoone lamented.

Earlier in February, the national consumer price index hit 7.5%, the highest it’s been since 1982. New York Federal Reserve President and CEO John Williams recently suggested that a shift from service purchases – restaurants, tourism and entertainment – and toward online shopping for tangible goods, has helped fuel that spike. The increased demand for goods backed up supply chains, while labor has been short with businesses forced to pay higher wages, Williams told attendees of a Feb. 18 video conference with New Jersey City University. But the waning of omicron and the greater prevalence of COVID-19 vaccines and treatments should restore consumer confidence. “Over time, consumers should also start to cut back on buying goods that are in short supply and switch back to in-person activities like travel, dining, and entertainment, where supply is less constrained overall,” he added.

But Semblewski said he felt that price reductions will not happen soon. “In my time I’ve seen prices spike and they’re always quick to go up but very slow to come back.”