Arts & Culture

In a big surprise, the job market surged in January even as omicron cases spiked

By Scott Horsley

Published February 4, 2022 at 11:46 AM EST

A man wearing a face mask walks past a "Now Hiring" sign in front of a store on Jan. 13, in Arlington, Va. The labor market is showing resilience despite a recent spike in omicron-related coronavirus infections.

Updated February 4, 2022 at 11:00 AM ET

The U.S. job market came through January in much better shape than expected despite a winter wave of coronavirus infections.

Employers added 467,000 jobs last month, according to a new tally from the Labor Department, far outpacing even the most optimistic forecasts. The gains came despite a surge in COVID-19 cases tied to the omicron variant.

"Omicron, Schmomicron," economist Ian Shepherdson of Pantheon Macroeconomics wrote in a research note. "This is a much stronger report than expected."

Revised figures also show job gains in November and December were significantly larger than initially reported. That suggests the economy had more momentum coming into the new year and weathered the latest pandemic punch with far less pain than expected.

The positive jobs report was welcome news for the Biden administration, which had been bracing for less favorable numbers.

The unemployment rate inched up to 4% in January from 3.9% the month before, but only because nearly 1.4 million people entered the job market.

The share of people working or looking for work increased, spelling possible relief on the horizon for employers who have struggled at times to fill job vacancies.

"As it becomes safer and fewer people are sick, they can participate more fully in the labor market and we will see that return," said Elise Gould, senior economist at the Economic Policy Institute.

The monthly job count was conducted around the second week of January, just as omicron cases were nearing their peak. Daily infections at the time were nearly seven times as high as they were when jobs were tallied in December.

Stronger job gains expected

The omicron wave likely did discourage some employers from hiring last month, and kept some workers on the sidelines. But the fallout was much less than analysts expected.

The 467,000 jobs added in January represents only a modest slowdown from December, when employers added more than half a million jobs. And the spike in omicron infections, while severe, has already begun to recede.

Daily infections dropped below 500,000 this week after peaking above 800,000 two weeks earlier.

Employers are keen to hire even more workers. The Labor Department counted nearly 11 million open jobs at the end of December. Surveys by the payroll processing company ADP show a large share of employers plan to add workers over the next six months.

"All of this data suggests that the recovery from omicron could be swift as the spread is contained," said Nela Richardson, ADP's chief economist.

But the labor market's outlook will still depend on the progress of the pandemic.

Changes in the public health outlook can easily sway demand for workers — especially at businesses such restaurants that rely heavily on in-person contact with customers. Restaurants and bars added 108,000 jobs last month.

A worker rings up an order at Frankie's Pizza on Jan. 12 in Miami, Fl. The labor market is getting healthier, but much will depend on the progress of the pandemic, which can easily sway demand for workers — especially at businesses that rely on in-person contact with customers.

Tight job market leads to higher wages and prices

The economic recovery has been hobbled at times by a shortage of available workers. When the coronavirus first hit the U.S. almost two years ago, millions of people stopped working or looking for work. As the pandemic has dragged on, some would-be workers have been slow to return.

"There is a pool of people out there who could come back into the labor force, but it's not happening very quickly," Federal Reserve Chairman Jerome Powell told reporters last week.

Employers have been offering higher wages and better benefits as they compete for scare workers. Private sector wages in January were up 5.7% from a year ago, while employees in some sectors saw wage gains as high as 13%.

Millions of workers have also been quitting their jobs, often in search of better opportunities elsewhere. Labor shortages and increased turnover have contributed to rising wages and higher prices.

That's one reason the Fed is now planning to raise interest rates in an effort to regain control over inflation. Consumer prices in December were up 7% from a year ago — the sharpest increase in nearly 40 years.