The Reason Omicron Was No Match For the US Job Market

The reality is that - thanks to vaccinations and, to a lesser extent, Covid exposure - more people are well enough to work and business is sufficiently booming that anyone who wants to get hired almost certainly can be. JL

Justin Lahart reports in the Wall Street Journal:

The U.S. economy added a seasonally adjusted 467,000 jobs last month—far more than economists were expecting. There were (also) substantial upward revisions, to the tune of 709,000 additional jobs, to the previous two months’ employment tally. The January job gain is striking given that the pay period came when the Omicron-fueled surge in Covid-19 cases was at its worst. People went looking for jobs despite the increase in Covid-19 cases, and they got hired. (Despite Omicron) more people are well enough to look for work now and, with fewer staff ill, more businesses have the capacity to hire.

If the labor market can handle Omicron, what can’t it handle?

The Labor Department on Friday reported that the U.S. economy added a seasonally adjusted 467,000 jobs last month—far more than the 150,000 economists were expecting. There were substantial upward revisions, to the tune of 709,000 additional jobs, to the previous two months’ employment tally. The unemployment rate, which is based on a separate survey from the jobs number, rose slightly to 4% from 3.9%.

The January job gain is especially striking given that the midmonth pay period the Labor Department based its employment figures on came precisely when the Omicron-fueled surge in Covid-19 cases was at its worst. People went looking for jobs despite the increase in Covid-19 cases, and they got hired.

Even so, Omicron sure left a mark. The survey of households used to construct the unemployment rate showed that 3.6 million people weren’t able to work because they were ill—far more than at any other month during the pandemic. About half of U.S. workers are paid by the hour, and weeks they don’t get paid they don’t get included in the Labor Department’s job count. If it hadn’t been for Omicron, the employment report would have been even better.

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So, what to make of it? To some extent the January job gains might have been magnified by the Labor Department’s seasonal-adjustment process. The holidays generate a lot of temporary employment, so when those stints are over the economy sheds a lot of jobs. The January job numbers get adjusted higher so that they better reflect the jobs trend. The pandemic might be throwing those adjustments out of whack, however, with companies in such dire need of workers that they made a lot of their hires over the holiday period permanent.

Yet that still seems like a reflection of job-market strength. And with Omicron fading, one can only wonder what the February jobs report will look like. Over the past week, there were fewer than half as many new Covid-19 cases recorded by the Centers for Disease Control and Prevention than during the week the January employment figures were based on. More people are well enough to look for work now and, with fewer staff ill, more businesses have the capacity to hire.

For the economy, this is all to the good. U.S. employment is getting closer to the levels it held before the pandemic, and the income boost that is providing to households will help sustain the recovery. For the stock market, though, it is more of a mixed bag. While a strong job market helps fuel demand, it can also intensify wage pressures and wipe away any hesitancy at the Federal Reserve over raising rates.

Still, if the alternative was Omicron knocking the stuffing out of the job market, investors should take it.