Biden administration officials have warned that US job growth likely slowed in January as a rise in Covid-19 cases tied to the more contagious Omicron variant sidelined workers and caused some businesses to temporarily shut.
Employers are expected to have added just 150,000 new positions last month, according to a consensus forecast compiled by Bloomberg. Some economists even think that a contraction is possible.
After several straight months of rapid declines, the unemployment rate is expected to have steadied at 3.9 per cent in January, the same level as in December when 199,000 jobs were added.
The labour force participation rate, which tracks the share of people employed or looking for a job, is also forecast to have flatlined in January at 61.9 per cent, more than 1 percentage point below the pre-pandemic threshold.
The data, which will be released by the Bureau of Labor Statistics at 8.30am US eastern time on Friday, were collected during the worst of the Omicron surge in the US, which fuelled a record-setting number of Covid cases, hospital admissions and fatalities.
Top economic officials in the Biden administration have sought to get out ahead of Friday’s figures, with Brian Deese, director of the National Economic Council, saying this week that the January employment data “could look a little strange”.
The White House has touted the robust labour market recovery as one of President Joe Biden’s most important accomplishments in his first year in office, which has otherwise been beset by legislative setbacks. Despite signing into law a bipartisan infrastructure bill, his landmark $1.75tn Build Back Better spending package has stalled in Congress.
“It turns out that the peak of Omicron cases coincided with when the payroll data was being collected,” Jared Bernstein, a member of Biden’s Council of Economic Advisers, told CNN this week. “If you were not at work, if you were on unpaid leave, you’re not counted as being on payroll.”
Before the winter wave of coronavirus infections, employers were already struggling to fill their ranks, as concerns about catching Covid and childcare issues deterred many people from joining the workforce.
The number of job openings has swelled as a result, with more than 10mn reported in the final month of 2021. That translates to 1.7 job openings for every unemployed worker, the highest since the US government began collecting the data two decades ago.
Some workers have sought to capitalise on the demand for new hires and have left their jobs in search of higher-paying roles. A total of 4.3mn Americans quit in December, just shy of November’s 4.5mn record.
US labour costs have, in turn, risen sharply, as employers raised wages and sweetened benefits to compete for talent. Average hourly earnings are forecast to have climbed another 0.5 per cent in January, or 5.2 per cent on an annual basis.
The Federal Reserve is expected to look past January’s jobs slump as it charts a course towards its first interest rate increase since 2018 at its next policy meeting in March.
Jay Powell, the Fed chair, has acknowledged there could be “softening” in the economy because of Omicron, but said any weakness should be “temporary”.
“We think the underlying strength of the economy should show through fairly quickly after that,” he said at the press conference following January’s gathering of the Federal Open Market Committee.
Elevated inflation has compelled the Fed to scale back its monetary policy support far more quickly than initially planned. Top officials have also left open the door to a more aggressive string of interest rate rises this year or even raising rates by half a percentage point, as opposed to the quarter-point increases that have become the norm.
The central bank is also expected to begin reducing its nearly $9tn balance sheet soon after the first interest rate adjustment in a bid to further tighten the settings of its monetary policy.
Source: Economy - ft.com
