This Friday, the Bureau of Labor Statistics (BLS) will release the January jobs report—the first of 2022. The job market is likely to slow dramatically as the impacts of Omicron are fully felt. Job growth has been sluggish in the last few months, and the advent of record high COVID cases is likely to throw the recovery in reverse. As we enter year three of the pandemic, Omicron is a reminder that the pandemic continues to write the script of the recovery.
Here are four trends we'll be watching for in the January jobs report:
- Job losses likely due to Omicron: Payroll gains slowed to 199,000 in December 2021, the slowest since December 2020. The already sluggish gains are likely to turn into modest job losses in Friday's report as the Omicron variant surged to record highs in January.
- Unemployment rate flat: The unemployment rate is likely to remain flat at 3.9 percent in January, unchanged from December. While payroll losses are possible in January, a large jump in the unemployment rate is unlikely. This will depend on whether businesses furloughed workers or kept them on payroll during the surge. It will also be important to take note of the number of employed but absent due to illness, which may rise to a record high in January.
- Job losses in COVID-sensitive sectors: Job losses in leisure & hospitality and health care may drag down overall payroll employment. While other COVID-sensitive sectors like education and retail may be impacted, seasonal factors may also help mute job losses in those sectors.
- Slower wage growth amid Omicron: While wage growth is still high, especially for lower-wage industries, it may cool in January as employer demand is muted.
Omicron is another pandemic curveball for the job market
The record Omicron surge makes it difficult to predict what will happen in Friday's jobs report. The record level of COVID cases means many more workers were unavailable for work in January, either because they were sick and/or quarantining or out caring for sick family members or school-age children learning remotely.
The Census Bureau's Household Pulse Survey showed almost 8.8 million Americans reported not working in early January due to being sick with COVID symptoms or caring for someone sick, a 5.8 million increase from the previous month.
Over the course of the pandemic, new COVID cases have been somewhat predictive of job market data, but current record levels represent a situation without precedent and there are few good comparisons. Since September 2020, each new 1,000 daily cases has been correlated with 4,000 fewer job gains, but the level of cases we've seen in January are unlike any other previous point in the pandemic, creating significant uncertainty about what the January jobs report will show. While this simple relationship would imply over 2 million job losses, that is extremely unlikely, but modest job losses are plausible.
Benchmark revisions to reduce 2021 jobs growth modestly
In the January jobs report, the Bureau of Labor Statistics will also release its benchmark revisions for payroll levels for March 2021. The BLS's preliminary benchmark estimates forecast a modest downward revision in payroll employment of 166,000 for March 2021.
Notably, the estimated revisions vary significantly by industry. These range from transportation & warehousing, estimated to add an additional 247,900 jobs through revisions, to leisure & hospitality, which is projected to lose 597,000. The revisions are likely to be relatively small in the context of the enormous disruption caused by the pandemic, but could still offer a more nuanced picture of the job market trajectory over the last two years.
Conclusion
The January jobs report is likely to show the job market getting off on the wrong foot in 2022. Omicron is another pandemic curveball for the job market, and we are likely to see modest job losses in January as a result. While the impact of Omicron is likely to be temporary as the public health situation improves, this variant is a reminder that the path to recovery is a bumpy one, especially while the pandemic persists.