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The country’s job recovery accelerated last month despite a spike in new coronavirus infections.
US employers added 467,000 jobs in January, according to a new tally from the Labor Department. That’s far better than the 150,000 jobs forecast by forecasters, although it marks a slowdown from December, when revised figures show the country gained 510,000 jobs. Employment gains for November were also revised upwards.
The unemployment rate rose slightly in January to 4% from 3.9% in December.
Hiring could have been even stronger last month had it not been for the new wave of infections linked to the omicron variant, which has weighed on employers’ demand for labor and kept many potential workers on the sidelines.
The monthly jobs count was taken around the second week of January, just as omicron cases were approaching their peak. Daily infections at the time were nearly seven times higher than they were when jobs were counted in December.
Infections are already starting to decline
The peak of cases, although serious, has already started to recede. Daily infections have fallen below 500,000 this week after peaking at more than 800,000 two weeks earlier.
“The question then is, ‘How fast are they going to go down?’ said Elise Gould, senior economist at the Economic Policy Institute. “You might see a recovery [in the labor market] as early as February, and certainly March, if we can start putting the pandemic behind us. »
New jobless claims have fallen over the past two weeks after a brief jump earlier in January.
And there are signs that employers are still eager to hire. The Ministry of Labor counted nearly 11 million open jobs at the end of December. ADP polls show that a large portion of employers plan to add workers in the next six months.
“All of this data suggests that omicron’s recovery could be rapid, as the spread is contained,” said Nela Richardson, chief economist at payroll processing firm ADP.
The economic outlook still hinges on the pandemic
But the labor market outlook will still depend on how the pandemic progresses.
Changes in the public health outlook can easily influence the demand for workers – especially in businesses such as restaurants that rely heavily on in-person contact with customers. Restaurants and bars added 108,000 jobs last month.
Retailers added 61,000.
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The winter spike in coronavirus cases has also kept some people out of the labor market who otherwise would have worked.
A Census Bureau survey in early January found that nearly 8.8 million people were unable to work because they were sick with COVID-19 or caring for someone who was – a multiplication by three compared to the previous month.
The jobs report includes encouraging signs for a recovery that has been hampered by a shortage of available workers.
When the coronavirus first hit the United States nearly two years ago, millions of people stopped working or looking for work. As the pandemic drags on, some potential workers have been slow to return.
“There’s a pool of people who could get back into the workforce, but it’s not happening very quickly,” Federal Reserve Chairman Jerome Powell told reporters last week.
Friday’s report shows more than a million people entered the labor market in January, while the share of people working or looking for work rose.
A tight labor market drives up wages and prices
These extra workers are a welcome sign for companies struggling to fill vacancies.
Employees also resigned in large numbers, often in search of better employment elsewhere. A Labor Department report earlier this week showed that 4.3 million workers quit their jobs in December, the most recent month for which figures are available.
Labor shortages and increased turnover contributed to higher wages and prices.
This is one of the reasons the Fed is now considering raising interest rates, in an effort to regain control of inflation. Consumer prices in December rose 7% from a year ago – the biggest increase in nearly 40 years.
Wages and benefits have also increased as companies compete to attract workers. Employer labor costs were 4% higher at the end of last year than the year before.
Forecasters say the competition for workers could ease somewhat, as the omicron wave subsides and more people return to work.
“As it becomes safer and fewer people get sick, they can participate more fully in the workforce and we’ll see that come back,” Gould said. “Unfortunately, one of the by-products of that will be that, as workers are less scarce, they may not have the same kind of leverage that they had in the fall to raise their wages.”