The highly transmissible delta variant grabbed headlines during the third quarter. Figure 1 shows the number of daily new confirmed Covid-19 cases spiked starting in July as the delta variant spread. Covid case counts remained elevated during August before the growth rate of new cases slowed and trended back lower during September. The U.S.’s fourth Covid wave occurred as the pace of vaccinations slowed and the percentage of fully vaccinated individuals fell below foreign countries.
The official response to the fourth Covid wave differed considerably from prior Covid waves. Instead of returning to the strict lockdowns used early in the pandemic, public officials emphasized vaccinations and masking. While the change in approach blunted the delta variant’s economic impact, the economic recovery still encountered separate labor market and supply chain headwinds during the third quarter. Those headwinds caused both Wall Street economists and the Federal Reserve to lower their GDP growth estimates for the remainder of 2021.
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