Jobs Report Shows Strong Gains For January And Revises Prior Months Upward – The New York Times

Employers added 467,000 jobs in January, seasonally adjusted, the Labor Department said on Friday. The report smashed the projections of economists, who had been expecting the wave of coronavirus cases associated with the Omicron variant to lead to anemic gains, if not an outright decline in jobs. Instead, employers kept on hiring.

“Clearly something is different about this surge,” said Julia Pollak, chief economist for the career site ZipRecruiter. Companies that struggled all fall to recruit workers weren’t about to reverse course just because cases shot up for a few weeks, she said. Even restaurants and hotels, which slashed jobs during earlier pandemic waves, hired workers last month.

“Employers who have been engaged in this dogfight for talent, they’re not standing down,” Ms. Pollak said. “They are sticking around because they think the surge will be over soon.”

At the White House on Friday, President Biden hailed the economy’s “historic” progress. “America’s job machine is going stronger than ever,” he said.

The January data was collected in the first weeks of the year, when coronavirus cases topped 800,000 a day and millions of workers were kept home by positive tests, suspected exposures or child care disruptions. More than 3.6 million people reported being absent from work because of illness, more than at any prior point in the pandemic. Remote work, which had been trending down as white-collar employees returned to the office, jumped back up in January.

Omicron did take an economic toll. The unemployment rate rose slightly to 4 percent as some businesses laid off or furloughed employees. An alternative measure of employment, based on a survey of households, actually fell by more than a quarter-million. And economists warned that measurement issues and other quirks made the data difficult to interpret.

Still, the overarching message of the report was one of resilience in the face of a resurgent pandemic. Revised estimates showed stronger job growth in November and December than reported earlier, indicating that the economy lost less momentum at the end of the year than previously believed. And the solid gain in January suggests that Omicron, while disruptive, did little to dent employers’ underlying confidence in the recovery.

“We saw a two-week timeout in the country,” said Becky Frankiewicz, president of ManpowerGroup, a staffing firm. At the peak of the recent wave, she said, nearly a third of Manpower’s in-person workers in several cities were absent. Now, she said, “we’re starting to see people come back out of it.”

Officials at the White House, who had spent days preparing reporters and the public for the possibility of a grim report, were openly relieved on Friday.

“I don’t think I’ve ever been happier to be more wrong,” Jared Bernstein, a top economic adviser to Mr. Biden, wrote in an email.

The U.S. economy has regained more than 19 million of the 22 million jobs lost in the early weeks of the pandemic, and the unemployment rate has fallen far faster than forecasters expected, even after the uptick in January.

Yet Mr. Biden has struggled to convince voters that his economic policies are working, in part because of lingering supply-chain bottlenecks, labor shortages and the highest inflation in decades.

The January data provided little indication that those issues will be resolved quickly. The number of adults participating in the labor force fell last month, suggesting Omicron may have added to hiring difficulties. And average hourly earnings continued to rise — good news for workers, but a possible source of concern for policymakers at the Federal Reserve, who have become increasingly worried that wage gains may become a larger driver of inflation.

Adrian Washington, a residential developer in the Washington, D.C., area, said Omicron had done little to set back his business, in part because the wave hit Washington over the holidays, when activity tends to slow anyway. He posted several open positions in January, and plans to do more hiring this year.

“Really, I am — and I think other people are — starting to look past Omicron and saying, ‘OK, we’ve shifted from fighting it to living with Covid,’” he said.

But the ripple effects of the pandemic are still affecting Mr. Washington’s business. He offered raises of 10 to 15 percent at the start of the year in a bid to retain employees in an increasingly competitive job market. And snarled supply chains force him to order lumber and other key materials months earlier than normal, and at higher prices. That means taking risky bets when rising interest rates make the outlook for the housing market uncertain.

“We’re accepting these cost increases now with the hope we can pass them on, but who knows?” he said.

While Omicron appears to have done less damage to the overall economy than many people feared, it has been painful for many individual families and businesses. Six million people reported in mid-January that they had worked fewer hours — or not at all — at some point in the previous four weeks because their employer closed or lost business as a result of the pandemic, the Labor Department said. That was about twice the number who reported such a disruption a month earlier.

Robert LeBlanc, a restaurateur in New Orleans, had six locations heading into the pandemic — a mix of local restaurants and neighborhood bars, as well as a small hotel — “all of which were profitable, soundly profitable,” he said. But the economic ravages of Covid-19 led him to shut half of his businesses even before the latest wave.

“Half our man-hours were lost because of Omicron,” he said. “We had to close down each one of our restaurants for at least two days — some of them for four or five days — because we had so many people who had it at once, and now subsequently pretty much everybody on our team has gotten it and had to quarantine and take time off.”

Sales have sunk to levels not seen since the darkest days of 2020.

This “last blow of Omicron” felt like “the worst one yet,” Mr. LeBlanc said. Not only did lunch and dinner crowds seem to thin out, but the government aid that helped get the business through past surges was no longer available. “People in the industry are just running out of gas,” he said.

Workers, too, have had to face this stage of the pandemic without the expanded unemployment benefits and other aid that the government offered earlier. That has drawn criticism from some progressives, who argue that the Biden administration is effectively declaring victory too soon. The unemployment rate for Black workers was 6.9 percent in January, more than double the rate for whites. Other groups, such as Hispanic workers and people without a college degree, are also still experiencing elevated levels of unemployment.

“I still see the administration celebrating the greatest recovery and quickest recovery in our history,” said Alex Camardelle, director of work force policy at the Joint Center for Political and Economic Studies, a research group focused on issues facing Black Americans. “We’re saying, ‘Not so fast.’”

Jose Ramirez, a fast-food worker in San Francisco, woke up on New Year’s Eve with a tickle in his throat. Within days, he was running a fever and had tested positive for Covid-19. His three children and his 78-year-old father, who lives with them, also contracted the virus.

Mr. Ramirez, 33, said his first concern was for his children, two of whom are too young to be vaccinated, and his father, whose age puts him at greater risk. But the financial impact was never far from his mind.

Mr. Ramirez, who is from El Salvador, ended up missing two weeks of work, and without paid sick leave, he earned just $250 in January. He has fallen behind on rent.

“I don’t really know what I’m going to do to pay what I owe,” he said through an interpreter. “It’s by a miracle of God that my family and I have been able to survive. But this has been very hard for me economically.”

“This has never happened before,” Mr. Biden said of last year’s job gains. “History has been made here.”

Mr. Biden said the past year’s job gains — 6.6 million — and a rapidly declining unemployment rate had shattered records. While that is true, the economy was clambering back after historically large job losses at the onset of the pandemic.

That said, employment has bounced back and joblessness has declined much faster than the vast majority of economists had expected. That owes partly to the robust government response to the pandemic, which included about $5 trillion to support businesses, workers and markets as the economy was rocked by repeated lockdowns to contain the coronavirus’s spread.

“If you can’t remember a year when so many people went to work in this country, there’s a reason — it never happened,” Mr. Biden said.

While government support helped the economy stage a breakneck turnaround by stoking consumer demand at a time when supply chains were constrained by pandemic limitations, the big spending has also helped fuel a burst in prices. Inflation is expected to come in at 7.3 percent in the year through January when the government releases fresh consumer price data next week.

As prices rise rapidly, wages are struggling to keep up, even though they, too, are rising swiftly. Average hourly earnings jumped 5.7 percent in the year through January, Friday’s job report showed, a full percentage point above economist forecasts in a Bloomberg survey.

“For many Americans, wages are up this year,” Mr. Biden said. “That’s good — we have to continue to keep wages growing. And we need even more high-paying jobs.”

The Labor Department on Friday said that job growth at the end of 2021 was significantly stronger than initially reported. The government now says that employers added 647,000 jobs in November, up from the 249,000 reported previously, and 510,000 in December, up from 199,000.

On the other hand, the midyear jobs boom no longer looks as robust. The government now estimates that employers added fewer than 700,000 jobs in July — a strong number, but far below the nearly 1.1 million previously reported.

Last year was a banner year for job growth, by any measure. Payrolls grew by 6.7 million over the full year, the most on record — and not much different than the 6.6 million reported before the revisions. But the pattern of growth looks very different. Rather than rising and falling as variants came and went, job growth appears to have held relatively steady throughout the year.

The revisions were the result of an annual process in which government statisticians incorporate more complete data and updates the formula that adjusts for seasonal patterns. Those patterns were disrupted by the pandemic, and the Labor Department said the new methods do a better job of accounting for the changes.

But the official government data paint an overly rosy picture of the number of people struggling with inadequate part-time work.

For one thing, the monthly numbers on so-called involuntary part-time employment don’t break out workers in specific sectors, like retail and hospitality, where the phenomenon is far more common, as we know from annual data.

The monthly data also fail to capture workers who may not mind being part-time, but who would still prefer more hours and more consistent hours. There is, after all, a big difference between working 10 hours per week and working 30 hours per week, even though both would be considered part-time schedules.

A large number of part-time service workers appear to want more hours, however. For example, a twice-yearly survey by Daniel Schneider, a Harvard sociologist, and Kristen Harknett, a sociologist at the University of California, San Francisco, found that about one-quarter of part-time workers at large retailers and restaurant chains fall into this category.

Finally, the shift in the retail and hospitality industries toward less stable, part-time work generally took place between the 1960s and mid-1990s. That means the best way to understand whether service industry jobs are becoming more stable is not to compare this month’s numbers to last month’s, or this year’s to last year’s, but to compare today’s data with similar data from several decades ago. By that standard, today’s data look pretty underwhelming.

In January, average weekly hours, a reliable proxy for part-time work, fell slightly to 30.2 for rank-and-file workers in the retail industry, compared with 35 hours in 1972, the earliest year for which data are available.

Average weekly hours for leisure and hospitality industries in January fell slightly to 24.6, compared with 33 in 1964, the earliest year on record for those industries.

All of which is to say that while today’s labor shortages appear to be helping workers in some respects, like increasing their wages, they do not appear to be reversing the long-term trends that have created economic insecurity for many service workers.

“Half our man-hours were lost because of Omicron,” he said. “We had to close down each one of our restaurants for at least two days — some of them for four or five days — because we had so many people who had it at once, and now subsequently pretty much everybody on our team has gotten it and had to quarantine and take time off.”

Even though employment was unexpectedly resilient overall last month, six million people reported in mid-January that they had worked fewer hours — or not at all — at some point in the previous four weeks because their employer closed or lost business as a result of the pandemic, the Labor Department said Friday. That was about twice the number who reported such a disruption a month earlier.

This “last blow of Omicron” felt like “the worst one yet,” Mr. LeBlanc said. Sales have sunk to levels not seen since the darkest days of 2020. Not only did it seem as though lunch and dinner crowds thinned out, but the government aid that helped get the business through past surges was no longer available.

The pandemic relief package that President Biden signed into law in March included $28.6 billion for a Restaurant Revitalization Fund, which through the Small Business Administration gave grants to restaurants and other food businesses.

That fund was closed in October after being depleted, having fulfilled fewer than a third of the grant requests it had received.

The Independent Restaurant Coalition, a trade group, estimates that 42 percent of businesses that did not receive the grants are in danger of filing for bankruptcy protection or have done so, compared with just 20 percent that received the grants. The coalition has organized a “phone-your-member-of-Congress campaign” to press legislators to replenish the fund.

So far, those calls have been drowned out by debate over other priorities.

Mr. LeBlanc prays that a continued decline in coronavirus cases, paired with the coming of warmer weather and festivals of spring — most specifically Mardi Gras, in the case of New Orleans — can be the “glimmer of hope” that diners and workers have been waiting for.

Hiring surprised forecasters, as employers added 467,000 jobs instead of the lackluster 125,000 that analysts had expected amid the virus surge. Unemployment ticked up, but wage growth came in very strong — average hourly earnings were 5.7 percent higher than a year earlier, a full percentage point faster than economists had expected.

President Biden and his advisers are pointing to the strong data as evidence that his administration’s economic policies are working. Pay gains are robust, workers are finding opportunities and labor has power in today’s job market. Revisions to last year’s job numbers showed that progress was even faster than previously reported.

Last year “was the greatest year of job creation under any president in history,” Mr. Biden posted on Twitter following the report, while also celebrating the big January gain.

But the fact that wages are surging so quickly could also increase fears that companies will lift prices to cover their rising labor costs, exacerbating inflation. A key economic report next week is expected to show that the Consumer Price Index increased by 7.3 percent in the year through January, based on Bloomberg forecasts.

That is likely to turn all eyes toward the Fed. Jerome H. Powell, the Fed chair, and his colleagues are poised to raise interest rates for the first time since 2018 at their next meeting in March, a move meant to cool off the economy as inflation runs at its fastest pace in nearly 40 years. Officials had expected to find themselves in the uncomfortable position of making that move, and signaling what comes next, at a time when the latest job market data looked a little bleak. Instead, they will be doing it at a moment when both price gains and wage growth appear heady.

Still, it may be difficult to derive a clear signal from Friday’s job numbers, because they were likely susceptible to quirks. The pandemic has roiled every aspect of hiring, and labor market tightness may have stopped employers from making their usual post-holiday layoffs, messing with seasonal adjustments to the figures.

The Fed will have to try to maneuver through the weirdness in the data as virus flare-ups make economic forecasting a field of nonstop surprise.

“We’ll be humble and nimble,” Mr. Powell pledged of the central bank’s policy path, speaking at a news conference last month.

“We’re going to be led by the incoming data and the evolving outlook, which we’ll try to communicate as clearly as possible, moving steadily” and transparently, he added.

Wall Street economists and investors took Friday’s data as a signal that the central bank may need to remove its support for the economy even more rapidly than it had planned. The wage number in particular was expected to catch policymakers’ attention: Mr. Powell has previously signaled that the central bank would be worried if wage growth exceeded productivity, a sign that it would drive prices higher over time.

“No matter how bullish you are about productivity growth, the Fed can’t live with that pace, if it is sustained,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote following the report.

Other Fed watchers suggested that this might increase the odds of a supersize rate increase in March. The Fed typically raises borrowing costs in quarter-percentage point increments, but some investors have begun to pencil in a coming half-point move.

Friday’s data “will inevitably further fuel expectations of the Fed unleashing a larger” increase in March, Andrew Hunter at Capital Economics wrote in a research note.

Investors on Friday sharply increased their bets that the central bank might make six or seven quarter-point rate increases in 2022, though they were still most heavily betting on five moves this year as of 9:30 a.m.

The Fed’s benchmark interest rate is currently set near zero, and five increases would put it in a range of 1 percent to 1.25 percent by year-end.

The Fed’s biggest problem at the moment is that it is not clear when or how quickly inflation will fade. Used-vehicle prices, which have been a big driver of overall price increases, might be on the cusp of stabilizing but have yet to cool off notably. Gasoline prices are headed back up, food is costing more and rents have been increasing steeply.

With job gains proceeding at pace, keeping the economy on track to satisfy central bankers’ maximum employment goal, Fed officials will be able to more narrowly focus on preventing an economic overheating. They are trying to make sure that they do not fall behind the curve on high inflation, allowing it to become so locked into consumer and business expectations that it becomes a permanent feature of the economic landscape.

How the Fed strikes the balance — and how much it slows down the economy with its rate increases this year — could have important political implications, too. Voters are already glum about the economy’s prospects, and President Biden is suffering in the polls.

Economists have been expecting economic growth to moderate in 2022, as government pandemic supports fade and the Fed pulls back its help. The fact that momentum is holding up in spite of Omicron, and that revisions released Friday showed even stronger job growth late last year than first reported, offers the White House good news to seize on.

Ben Casselman contributed reporting.

As Jeanna said, the wage data (+5.7 percent year over year) sets up rate hikes. Two-year U.S. yields are up nine basis points, to 1.29 percent, a level not seen since Feb. 2020.

Stocks have had a volatile start to the year as traders prepare for the Fed to raise rates to combat rising inflation. As prices climb quickly, investors are questioning how fast and how high rates will rise. The first increase could come as soon as next month, policymakers signaled in late January.

Yields on 10-year Treasury notes declined two basis points, or 0.02 percentage point, to 1.81 percent. On Thursday, the yield jumped six basis points. Yields were about 1.5 percent at the start of the year, and tech stocks have suffered as yields have risen.

Shares in Meta, the parent company of Facebook, plunged 26 percent on Thursday after it said Facebook was losing users, dragging down U.S. stocks. The S&P 500 fell 2.4 percent. In premarket trading on Friday, Meta shares were slightly higher. But other tech stocks staged a stronger recovery, including Amazon shares, which were 12 percent higher in premarket trading, and Snap shares, which rose 50 percent.

Stocks in Europe were mostly weaker. The Stoxx Europe 600 fell 1.1 percent, extending Thursday’s 1.8 percent decline.

This year, it could be extra messy because the pandemic has disrupted normal seasonal patterns. The labor shortage led some companies to hire permanent workers instead of short-term seasonal help during the holidays; others may have retained temporary workers longer than planned to cover for employees who were out sick. If that results in fewer layoffs than usual, the government’s seasonal adjustment formula will interpret that continued employment as an increase.

Other numbers could also be deceptive. The unemployment rate, for example, could fall even if hiring slowed. That is because the government considers people unemployed only if they are actively searching for work, and the spike in Covid cases may have led some to suspend their job searches.

Data on average hourly earnings could also be skewed because it is based on the payroll data — people who aren’t on payrolls aren’t counted in the average at all. Low-wage workers were probably the most likely to be missing from payrolls last month, since higher-wage workers are more likely to have access to paid sick leave. That could lead to an artificial — and temporary — jump in average earnings when policymakers at the Fed are watching wage data for hints about inflation.

The payroll figure is meant to include anyone who worked even a single hour in a pay period, so people who miss only a few days of work will still be counted. Employees taking paid time off, too, are counted as working. Still, the sheer scale of the Omicron wave means that absences almost certainly took a toll.

The jobs report also includes data from a survey of households, which uses a different measure: It considers people employed if they report having a job, even if they are out sick or absent for other reasons.

Economists typically pay more attention to the survey of businesses, which is larger and seen as more reliable. But some said they would be paying closer attention than usual this time to the data from the survey of households because it will do a better job of distinguishing between temporary absences and more-lasting effects from Omicron, such as layoffs or postponed expansions.

“You can get too close to any given month’s data,” said David Berson, the chief economist at Nationwide Insurance. Even if the January report is disappointing, he said, the weakness is most likely “a one-month, or perhaps two-month thing.”

A Bloomberg survey of economists points to a gain of about 150,000 jobs in January, somewhat fewer than in December. But specific estimates range wildly, from a gain of 250,000 to a loss of 400,000.

Because of the different groups and sampling processes associated with the two surveys included in the jobs report — one of employers and another of households — conflicting positive and negative indicators may emerge.

The government announced on Thursday that new jobless claims decreased last week for the second week in a row. The unemployment rate is far lower than forecasters at the Congressional Budget Office predicted early last year. And there were nearly 11 million job openings at the end of December, near record highs.

All of that suggests that the underlying trend of a tight labor market — in which employers compete to attract workers — is continuing.

As the effect of Omicron fades, job growth is expected to pick up again in the first half of the year, along with wages and the overall economy.

“After that,” Mr. Berson said, “the crystal ball gets very hazy.”