More U.S. companies move to a four-day workweek
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AP
U.S. employers unexpectedly added a booming 467,000 jobs in January even as COVID’s omicron variant kept millions of Americans out of work.
The payroll gains — blowing past a forecast for a 150,000 increase — were broad-based across industries.
Leisure and hospitality, which includes restaurants and bars, led the job gains with 151,000, a sign of strength after the pandemic hit them hardest. Professional and business services added 86,000; retail, 61,000; transportation and warehousing, 54,000.
Even more encouraging: Job gains for November and December were revised up by a whopping 709,000, more than doubling what were weak average monthly advances of 224,000 during that period to 578,000. The upgrade reveals an economy and labor market that were much more resilient than believed toward the end of 2021 as omicron emerged.
Unemployment rate is encouraging
The unemployment rate rose from 3.9% to 4% last month, the Labor Department said Friday. The rate, however, rose for an encouraging reason: about 1.4 million Americans streamed into a favorable labor market. The share of adults working or looking for jobs jumped from 61.9% to 62.2%, though that’s still well below the pre-COVID mark of 63.4%.
The big jump in the labor force despite omicron suggests Americans who have been fearful of the virus, caring for their children or living off stimulus checks or other aid may finally be returning to a robust labor market
“The ease of finding a better job, the rising wages, and perhaps the (expiration) of the child tax credit last month might have incentivized would-be workers,” says economist Kathy Bostjancic of Oxford Economics.
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About 3.6 million workers called in sick in early January, largely because of omicron, the Labor Department said. The variant has proven highly contagious but relatively mild compared to previous COVID strains.
Nearly 80% of the idled workers are still counted as employed in Labor’s survey of establishments because they receive paid sick leave benefits, says economist Lydia Boussour of Oxford Economics. But that means as many as 2 million or so may have been dropped from payrolls because they didn’t get a paycheck the week that Labor conducted its survey.
Also, 6 million people said they couldn’t work because their employer closed or lost business due to the pandemic, nearly double the December figure, Labor said.
Labor shortages discourage layoffs
Yet the sidelined workers likely were at least partly offset by fewer-than-normal year-end layoffs. Many companies are hesitant to let workers go amid widespread labor shortages, says Goldman Sachs economist Spencer Hill. Retailers and restaurants, in particular, held onto holiday hires. says Diane Swonk, chief economist of Grant Thornton.
Also, many school janitors and other support staff are typically cut in January. But since fewer school workers were employed because of the pandemic, fewer were expected to be laid off, leading to a gain in education employment after seasonal adjustments, Hill says. As a result, local education added 29,000 jobs last month.
So far, the U.S. has recouped 19.1 million, or 86%, of the 22 million jobs lost early in the pandemic, leaving it 2.9 million jobs shy of its pre-crisis level. After annual revisions released Friday, the economy added a record 6.6 million jobs last year, slightly more than believed.
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Omicron’s impact on hours, workers
Omicron appeared to have delivered a punishing blow to the economy last month as daily cases surged above 1 million. Restaurant reservations tracked by OpenTable were down 20% last month compared to 2019 levels, according to Goldman Sachs. And Homebase, which provides payroll software to small businesses, said the number of employees working, hours worked and business open all tumbled.
Fed headed toward interest-rate hikes
The surprising employment gains provide a green light to the Federal Reserve to raise its key short-term interest rate, now near zero, by a quarter-point next month, Bostjancic says. The strong report will likely fuel some speculation of a half-point rise, says economist Andrew Hunter of Capital Economics.
It also kicks off what will likely be another year of outsize job gains as the economy continues to make up ground lost in the health crisis. Business demand for workers has shown no sign of flagging. In December, employers posted 10.9 million job openings and 4.3 million workers quit, typically to take higher-paying positions. Both are near all-time highs.
As government aid wanes and households deplete the $2.5 trillion in extra savings they amassed during the pandemic, Oxford expects a slower-growing economy to reduce average monthly job gains from 555,000 in 2021 to about 317,000 this year. But that would still be a roaring performance.
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