WASHINGTON (AP) — The message sent Friday by the U.S. jobs report was surprising: Despite an increase in virus cases in January, the job market is so healthy that employers continued to hire last month at a pace that far exceeded anyone’s expectations.
Before Friday, the widespread view was that the highly transmissible omicron variant of COVID-19 had kept people home and dampened hiring in January. Some economists even predicted a loss of jobs for the month. Instead, employers added 467,000 jobs.
At the same time, however, the sizzling labor market means that inflation is likely to continue to simmer, while ensuring that the Federal Reserve will raise interest rates several times this year in an attempt to slow sharp price increases – for food, gasoline, rent, cars and many other items – which squeezed millions of households.
Still, the jobs picture appears to be brightening steadily, with wages rising, layoffs falling and many employers eager to fill jobs. In its report on Friday, the government revised its job growth estimates sharply for November and December as well.
“What we’re really seeing here are businesses learning to live with the virus and to operate with the virus,” Labor Secretary Marty Walsh said.
He noted that the proportion of Americans telecommuting rose from 11.1% in December to 15.4% last month, suggesting that many employees were able to work from home even as omicron cases increased. .
Over the past year, the economy has added more than 550,000 jobs per month, extending its steady rebound from the deep two-month recession of 2020. Yet the United States remains at 2.9 million jobs below the number they had in the pre-pandemic month of February 2020.
Here are five takeaways from the January jobs report:
BETTER THAN WE THINKED
Not only were January’s job numbers surprisingly high, but the Labor Department reported that hiring at the end of last year was much stronger than it had originally thought. It revised up its estimate of the number of jobs added by employers in November and December by a total of 709,000.
Andrew Flowers, labor economist at recruitment firm Appcast, suggested that the improved job growth revisions “have radically changed our understanding of the trajectory of the labor market. Instead of a slowing trend from last summer, employment growth appears to be on the rise.
HELP SEARCHED IN RESTAURANTS AND HOTELS
One of the most startling figures from Friday’s jobs report was that hiring at restaurants and hotels – the types of employers that would likely delay hiring during a surge of virus cases – has sharply rose in January despite the omicron surge. The hiring gains in this sector suggest that many Americans have learned to live with the virus and continue to go out to eat and travel. Restaurants and bars added more than 108,000 jobs last month, hotels almost 23,000.
“This confirms that each successive wave of the virus has a smaller and smaller impact on activity and labor demand,” said Brian Coulton, chief economist at Fitch Ratings.
The unemployment rate fell from 3.9% in December to a still low level of 4% in January. But he did so, at least in part, for one encouraging reason: Many Americans withdrew from the labor force and began looking for jobs, and not all found one right away. Consequently, they were counted as unemployed.
The percentage of people working or looking for work – the so-called labor force participation rate – rose last month to 62.2%. This was the highest rate since March 2020, although it is still below pre-pandemic levels of more than 63%.
The influx of workers could help ease labor shortages that have left many businesses struggling to meet growing consumer demand.
“There are financial reasons to return to the labor market,” said Bernard Baumohl, chief economist at the Economic Outlook Group. “Washington is no longer sending emergency checks to households, and inflation continues to erode consumers’ purchasing power.”
Because the economy’s rapid and unexpected rebound sent employers scrambling to find workers, many responded by raising wages. Hourly wages rose last month by 5.7% for all workers and 13% for those working for hotels, restaurants and other leisure and hospitality businesses.
Yet overall wages have not kept up with inflation, which in December was at the fastest year-over-year rate since 1982. In December, the average hourly wage was actually falling 2% over the previous year after adjusting for higher prices. .
A GREEN LIGHT FOR THE FED
The strength of the jobs report is helping pave the way for the Federal Reserve to reverse its policy of keeping interest rates ultra-low to shield the economy from the fallout of the coronavirus. The central bank has indicated that it will start raising its benchmark rate, now close to zero, several times from March in an attempt to combat high inflation.
“The (employment) report as a whole continues to point to a robust labor market, characterized by low unemployment and strong job creation, which has weathered the disruptions created by the omicron variant,” said said Jim Baird, Chief Investment Officer at Plante Moran Financial Advisors. “It’s not that the Fed needed another reason to tighten in the short term, but it just got it.”
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