Topline
Private U.S. employers posted the strongest job growth in seven months in December, according to payroll processor ADP, but experts caution the promising data shouldn’t be cause for celebration just yet, forecasting it’ll take at least a few more weeks to know how the latest, record surge in coronavirus cases—spurred by the rapidly spreading omicron variant—will impact the economic recovery.
People exit a distribution site at a Bronx church.
Key Facts
Led by strong growth in the service sector and transportation industry, private employment increased by 807,000 from November to December, according to the ADP’s National Employment Report released Wednesday, surging past expectations calling for 375,000 new jobs and eclipsing the November figure of 505,000.
In a statement, ADP Chief Economist Nela Richardson said job gains were broad-based and illustrated a “strengthened” labor market in December, but acknowledged the data, which measures employment around the 12th of each month, came “as the fallout from the delta variant [of the coronavirus]
faded and as omicron’s impact had yet to be seen.”
Less than a week after the tracking period, omicron became the dominant strain in the United States, fueling a surge that pushed new daily cases from about 36,000 on December 12 to an all-time high of more than 1 million on Monday.
In an email, Mark Hamrick, a senior economic analyst at Bankrate, said it’s “difficult to measure” the economic impact of the omicron variant at this point and cautioned against dismissing its potential, pointing out widespread worker shortages stoked in part by lingering concerns over the pandemic, remain a big uncertainty.
“Risks are rising,” Moody’s Analytics’ Mark Zandi wrote in a weekend research note, adding that the economic recovery “is set to turn soft” as omicron stunts business and pointing to recently soft credit card spending (particularly for travel), decreased restaurant bookings, and widespread flight cancellations as key points of concern.
Though the economy added back about 6 million jobs last year, private sector payrolls are still nearly 4 million jobs short of pre-Covid levels, ADP notes.
Crucial Quote
“The pandemic continues to call the shots for the economy,” Zandi said Sunday. “The delta wave significantly weighed on growth and fanned inflation this past fall, and omicron is already doing significant economic damage: Credit card spending turned soft in recent weeks, the National Hockey League suspended play… and the airlines are struggling with flight cancellations as pilots and other personnel get sick.”
What To Watch For
The Labor Department’s December jobs report, which tracks government (in addition to private) employers, is set to be released Friday and should provide a broader picture of the job market, but it still won’t capture the latest Covid surge, Zandi notes. Economists forecast the U.S. added about 422,000 jobs last month, compared to 210,000 in November, but the Labor Department also surveys around the 12th of each month, meaning it will take “a few more weeks” before omicron’s economic impact is reflected in the data.
Key Background
Though waning Covid-19 infections helped usher in a streak of promising labor market developments in the fall, a recent uptick in cases coincided with a disappointing jobs report for November, when the United States added less than half of the jobs economists expected. The “weaker-than-expected jobs report adds to the fear we’ve seen with the omicron variant, and it may stoke fears of stagflation, which consists of slower economic growth and higher inflation,” says Jay Pestrichelli, the CEO of Florida-based investment firm Zega Financial. The delta variant-spurred wave of Covid-19 infections set a cautionary precedent earlier this year, fueling struggles that culminated with the job market’s worst month of the year in September.
Further Reading
Record 4.5 Million Americans Quit Jobs In November As Employers Struggle To Retain Workers (Forbes)
Source: https://www.forbes.com/sites/jonathanponciano/2022/01/05/decembers-stunning-job-growth-doesnt-tell-the-whole-story-omicron-sparked-significant-economic-damage/