The record-breaking surge of COVID-19 in January may have caused the first decline in employment since President Biden took office.
The January jobs report, set to be released Friday by the Labor Department, is expected to show the full effect of the omicron coronavirus variant on the economy. Economists are bracing for what they hope is a short-lived setback after a year of steady employment growth.
A disappointing jobs report could be yet another obstacle for Biden and Democrats as they attempt to sell voters on a strong but bumpy economic recovery from the coronavirus recession.
Spiking coronavirus cases driven by the omicron variant forced millions of Americans to miss work in January and cratered consumer activity in sectors still struggling to recover from the pandemic. Experts say the combination of omicron’s unprecedented speed and remarkably poor timing may have caused the first net decline in employment since December 2020.
“The job market is likely to slow dramatically as the impacts of Omicron are fully felt. Job growth has been sluggish in the last few months, and the advent of record high COVID cases is likely to throw the recovery in reverse,” wrote Daniel Zhao, senior economist at Glassdoor, in a Wednesday analysis.
Because of how the data is collected, experts caution the numbers may not provide a full picture of where the economy stands. The weekly average of new COVID-19 cases hit a record 806,851 on Jan. 16, according to New York Times data, four days after the Labor Department began conducting surveys for the January jobs report. While workers who fell sick during the survey period may be back at work already, they may not be counted in the survey of businesses used to calculate the monthly job gain.
“The employer survey is asking employers how many people were on the job that week, so if people are not at work because they are ill, they won’t be captured in those numbers,” said Krista Ruffini, an assistant professor at Georgetown University’s McCourt School of Public Policy.
“The timing of when the surveys are conducted has a disproportionate effect on those numbers.”
Still, more than 12 million Americans missed work in the first two weeks of January because either they or a dependent got sick, the highest level ever recorded by the Census Bureau.
Several private sector gauges of employment also flashed warning signs ahead of the federal report.
Private sector payrolls lost 301,000 jobs in January as the omicron variant surged, according to data released Wednesday by ADP, with 144,000 jobs lost by businesses with fewer than 50 employees. More than half of jobs lost in January were in the leisure and hospitality sector, which lost more jobs to the pandemic than any other industry.
Hours worked by employees also declined 5.1 percent in January, according to data released by payroll manager UKG this week, the largest decline since the pandemic began. Shifts in health care fell 4.5 percent compared to the same time last year, and retail shifts fell 7.2 percent from January 2021.
Economists expect the labor market to rebound in February as omicron continues to fade and demand for workers remains historically high. While layoffs rose in January as omicron spread, new claims for unemployment insurance remained close to pre-pandemic levels. Omicron’s relatively milder symptoms may also cause a harsher but shorter blow to the economy than previous waves.
“We don’t believe this record slowdown in workforce activity was a result of job loss greater than we typically see in January, however we are quite certain that the hiring of hourly workers did not accelerate in the month,” said Dave Gilbertson, vice president at UKG.
“We still see employers struggling to hire large numbers of hourly workers, as many organizations are continuing to get creative in the benefits offered to entice those workers off the sidelines.”
The U.S. economy gained 6.4 million jobs, grew 5.7 percent and saw consumer spending boom above pre-pandemic levels in 2021 thanks to a combination of effective COVID-19 vaccines and trillions in fiscal and monetary stimulus. The country has recovered all but roughly 600,000 of the 21 million jobs lost in early 2020, and the December unemployment rate of 3.9 percent was just 0.4 percentage points above the February 2020 jobless rate.
While the economy is far stronger now than many economists expected in 2020, a surge in consumer prices has wiped out some of those gains for households and almost all of its potential political benefits for Biden. The president’s approval rating sunk to 41 percent in a Pew Research poll released last week, and just 44 percent of respondents said they are confident in Biden’s handling of the economy.
“There does seem to be this tension between people’s perceptions as reported in polls and their confidence in the economy and then the headline numbers,” Ruffini said.
“Even if I’ve reentered the labor market and even if I’ve gotten a raise, if my groceries are suddenly a couple more dollars each week, I don’t really feel that additional wealth.”