Omicron Job Loss? Unemployment Claims Unexpectedly Spike One Week After Steep Drop In Jobless Benefits Numbers

Topline

The number of new unemployment claims unexpectedly jumped for the second week in a row this month, despite a steep drop in the overall number of Americans receiving unemployment benefits just one week earlier—a concerning sign for the labor market recovery after experts warned a record surge in coronavirus cases—spurred by the rapidly spreading omicron variant—could slow the economic recovery. 

Key Facts

About 230,000 people filed initial jobless claims in the week ending January 8, an increase of 23,000 from the previous week, according to the weekly data released Thursday.

Economists were only expecting about 200,000 new claims last week, according to Bloomberg data.

“This may well be the first report suggesting Omicron is leading to new job loss,” Bankrate senior economic analyst Mark Hamrick wrote in a Thursday note, pointing out the largest increases were reported in California and New York, where new claims totaled more than 20,000 combined.

The new report also showed the number of Americans receiving unemployment benefits fell to less than 1.6 million in the week ending January 1, a decrease of 194,000 from the previous week and the lowest level since June 1973.

Crucial Quote

“The future path of the pandemic remains highly uncertain, but the underlying job market narrative overall continues be one of scarcity of available applicants and workers,” Hamrick said. “The latest wrinkle, the high level of individuals testing positive, becoming ill or staying away from work, has added to supply chain disruptions with inflation already running red-hot.”

Key Background

The new unemployment data comes after a disappointing labor report on Friday showed the U.S. added a lower-than-expected 199,000 jobs in December. After the report, Hamrick said it was still “difficult to measure” the economic impact of the omicron variant at that 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. Economists surveyed by Bankrate said the variant could weigh on job growth in the first three months of the year, but estimated the unemployment rate will fall from 3.9% to 3.8% in a year. Moody’s Analytics’ Mark Zandi shared a similar word of caution, saying, “Risks are rising,” and forecasting that the economic recovery “is set to turn soft” as omicron stunts business. Amid the latest surge, credit card spending and restaurant bookings have already dropped substantially, while widespread flight cancellations have been another economic concern, Zandi notes. 

Tangent

According to the Labor Department, the U.S. has thus far recovered about 80% of the 20.5 million jobs U.S. employers cut between March and April of last year.

Further Reading

Record 4.5 Million Americans Quit Jobs In November As Employers Struggle To Retain Workers (Forbes)

December’s Stunning Job Growth Doesn’t Tell The Whole Story—Omicron Sparked ‘Significant Economic Damage’ (Forbes)

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