Omicron poses 3 major threats to the US economy, says Jerome Powell

Yet if it prolongs the pandemic, it could keep prices rising, hurt job growth and make the supply chain crisis worse.

"The recent rise in Covid-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation," Powell wrote in prepared testimony he's set to deliver Tuesday to the Senate Committee on Banking, Housing, and Urban Affairs.

As infections fell, starting in September, the job market rebounded, and the unemployment rate fell to 4.6%, the lowest rate since May 2020.

The economy has ebbed and flowed with rising and falling infections, and Omicron threatens to undo much of the economic goodwill America has generated throughout the autumn months.

"Greater concerns about the virus could reduce people's willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions," Powell wrote in his testimony.

Powell, who President Joe Biden recently renominated for a second term as Fed chair, said the imbalance of supply and demand have artificially sent prices surging well above the Fed's 2% annual inflation target.