Job growth rose far more than expected in January despite surging Omicron cases that seemingly sent millions of workers to the sidelines, the Labor Department reported February 4. Nonfarm payrolls surged by 467,000 for the month, while the unemployment rate edged higher to 4%, according to the Bureau of Labor Statistics. The Dow Jones estimate was for payroll growth of 150,000 and a 3.9% unemployment rate. The stunning gain came a week after the Biden Administration warned that the numbers could be low due to the pandemic. COVID cases, however, have plunged nationally in recent weeks, with the seven-day moving average down more than 50% since peaking in mid-January, according to the CDC. Most economists had expected January’s number to be tepid due to the virus, though they were looking for stronger gains ahead.
Along with the big upside surprise for January, massive revisions sent previous months considerably higher. December, which initially was reported as a gain of 199,000, went up to 510,000. November surged to 647,000 from the previously reported 249,000. For the two months alone, the initial counts were revised up by 709,000. The revisions came as part of the annual adjustments from the BLS that saw sizeable changes for many of the months in 2021. Those changes brought the 2021 total to 6.665 million, the biggest single-year gain in US history since 1983. “The benchmark revisions helped the numbers a bit just because it moved out some of the seasonal factors that have been at work. But overall the job market is strong, particularly in the face of omicron,” said Kathy Jones, chief fixed-income strategist at Charles Schwab. “It’s hard to find a weak spot in this report.”
For January, the biggest employment gains came in leisure and hospitality, which saw 151,000 hires, 108,000 of which came from bars and restaurants. Professional and business services contributed 86,000, while retail was up 61,000. Earnings also rose sharply, accelerating 0.7%, good for a 12-month gain of 5.7% and providing confirmation that inflation continues to gather strength. That yearly move was the biggest gain since May 2020 when wage numbers were distorted by the pandemic. The rate of wage gains, however, still lags inflation, which was running around 7% in December as gauged by the consumer price index. The labor force participation rate rose to 62.2%, a 0.3 percentage point gain, taking the rate, which is closely watched by Fed officials, to its highest level since March 2020 and within 1.2 percentage points of where it was pre-pandemic. The labor force participation rate for women rose to 57%.
“These data make it clear that the labor market ahead of Omicron was much stronger than previously believed, and it’s very tempting to argue that the [January] data mean that all danger of an Omicron hit has passed,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics. ” We’re a bit more cautious than that, not least because the near-real-time data fell through most of [January] and have only just begun to recover.” The job gains brought employment back to about 1.7 million below where it was in February 2020, a month before the pandemic declaration.