U.S. Lost 301,000 Private Jobs Amid January’s Omicron Surge—The Worst Monthly Showing Since 2020

Topline

After a stronger-than-expected showing in December, private U.S. employers posted their worst monthly job growth in more than a year on Wednesday, according to payroll processor ADP, one of the latest signs the record wave of Covid-19 infections in January has stunted the economic recovery.

Key Facts

Dragged down by more than 274,000 lost jobs in the service sectors, private employment fell by 301,000 from December to January, according to the ADP’s National Employment Report released Wednesday—far worse than the 200,000 new jobs economists were expecting and the 807,000 posted in December.

“The majority of industry sectors experienced job loss,” ADP Chief Economist Nela Richardson said in a statement, blaming the labor market weakness on the omicron variant-spurred wave of Covid infections and pointing out leisure and hospitality experienced the largest job loss. 

Though the economy added back about 6 million jobs last year, private sector payrolls are still roughly 4 million jobs short of pre-Covid levels, ADP notes.

Crucial Quote

“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,” Richardson said. 

What To Watch For

The Labor Department’s jobs report for January is set to be released Friday, and the White House has already warned the data could be disappointing in light of last month’s surge in Covid infections. “If you think about omicron in early January, and the impact it was having in terms of the number of people who were out sick, we do expect there to be some real variation in the data,” Brian Deese, President Joe Biden’s top economic advisor, said last week, adding that Americans “need to be prepared for January employment data that could look a little strange.” Economists expect the unemployment rate to remain flat at about 3.9%, according to Bloomberg.

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 and December, with the United States adding less than half of the jobs economists expected each month. 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

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