Over the past 16 months, there has been a strong relationship between daily new Covid cases and employment. If that relationship had continued to hold true even as daily new Covid cases surged to 800,000 in mid-January, we would have seen 2.3 million Americans lose their jobs.
And yet, instead of that catastrophic outcome, the economy barely sneezed at Omicron. According to the establishment survey, businesses added 467,000 payrolls in January. The household survey paints a similar picture, with the employment level rising by nearly 1.2 million and labor force participation rising by nearly 1.4 million. The labor force participation rate increased significantly from 61.9% to 62.2%, with the largest increase among African Americans (from 60.8% to 62.0%).
Note that these outcomes were partly the result of both seasonal adjustment factors and annual benchmark revisions. The economy usually sheds upwards of 2.8 million jobs in January as the seasonal bump in retail and transportation employment subsides. But pre-Covid seasonal patterns no longer seem to hold. Retailers, and transportation and warehousing companies raised hiring earlier than usual in 2021 and held onto workers after the holidays.
Even if one looks at unadjusted figures from the household survey, however, employment only fell by 114k—far less than the usual 1 million decline.
Furthermore, the number of people working part-time for economic reasons continued to fall, reaching levels not seen since 2001.
Those figures are particularly remarkable for a month in which 15 million people contracted coronavirus and substantial labor market disruption ensued. The jobs report details several ways in which Omicron affected employment, even as employment and participation rose:
- 3.6 million workers were absent from work due to illness—more than three times the usual January number. Those absences disrupted production and likely also caused income losses for workers without access to paid sick leave.
- The share of workers teleworking due to coronavirus also rose to 15.4% from 11.1% in December, after steadily declining for months as offices reopened. Temporary office closures caused some pain for the downtown businesses that serve office workers.
- 6.0 million people reported that they had been unable to work because their employer closed or lost business due to the pandemic, up from 3.1 million in December. Only 23.7% of those workers received at least some pay.
- 1.8 million persons were prevented from looking for work due to the pandemic, up from 1.1 million in the prior month.
Perhaps most surprisingly, employment in leisure and hospitality rose, despite visible declines in restaurant dining and travel in high-frequency data from OpenTable and the Transportation Security Administration.
Private sector wage growth rose to 5.7%—the predictable outcome of the tightest labor market on record, where there are almost two job openings for every unemployed American and employees are quitting their jobs in record numbers. Wage growth was highest in leisure and hospitality (13%), followed by professional and business services (6.9%), and healthcare and educational services (6.8%).
Other eye-popping numbers in the report include the enormous upward revisions to prior estimates for 2021. Job gains for the entire year were revised upwards by 684k new jobs to 7.1 million.