U.S. private sector businesses lost 301,000 jobs in January as the omicron variant of the coronavirus forced millions of Americans out of work last month, according to data released Wednesday by payroll processor ADP.
The ADP National Employment report showed sharp, broad declines in private sector payrolls for the first time since December 2020. A record-breaking surge of COVID-19 cases upended the U.S. economy in January as businesses struggled with staffing shortages and a dip in consumer activity.
“The labor market recovery took a step back at the start of 2022 due to the effect of the Omicron variant and its significant, though likely temporary, impact to job growth,” said ADP chief economist Nela Richardson.
“Leisure and hospitality saw the largest setback after substantial gains in fourth quarter 2021, while small businesses were hit hardest by losses, erasing most of the job gains made in December 2021,” Richardson continued.
Businesses with fewer than 50 employees took the heaviest losses in January, shedding 144,000 jobs in total. Firms with fewer than 20 employees lost 106,000 workers, making up more than a third of January’s total decline.
Leisure and hospitality firms, which are often hit hard by coronavirus surges, lost 154,000 workers in January. Only two industries — natural resources and mining, and professional services — gained jobs last month.
The ADP figures are released two days before the federal monthly jobs report, which also covers public sector employers. While the Labor Department and ADP jobs figures do not always move in the same direction, the steep decline in private sector payrolls is a foreboding sign ahead of the federal employment report.
The U.S. added just 199,000 jobs in December, though the unemployment rate sunk to 3.9 percent. Economists are bracing for overall job losses in January, but expect the labor market to bounce back as omicron fades.
“The January jobs report is likely to show the job market getting off on the wrong foot in 2022. Omicron is another pandemic curveball for the job market, and we are likely to see modest job losses in January as a result,” wrote Daniel Zhao, senior economist at Glassdoor.
“While the impact of Omicron is likely to be temporary as the public health situation improves, this variant is a reminder that the path to recovery is a bumpy one, especially while the pandemic persists.”