Strong labor market in 2021 faces Omicron threat


U.S. employers created a record number of jobs in 2021, as the number of layoffs fell to a half-century low and vacancies rose, but the pace of the strong labor market recovery could slow down early next year due to the uncertainty posed by the Omicron variant of the Covid-19 pandemic.

Unemployment benefit claims, an indicator of layoffs, have trended close to five-decade lows in recent weeks. Unemployment claims for the week ended Dec. 25 fell to 198,000 seasonally adjusted claims, from 206,000 revised the previous week, the Labor Department said Thursday. That leaves them hovering just above the 188,000 level recorded earlier in December, the lowest level since 1969.

Last week’s four-week moving average, which dampens volatility, fell to its lowest level since October 1969.

Strong job creation has been a cornerstone of robust economic growth in 2021 and would be used to underpin gains next year in the face of headwinds from the protracted pandemic, high inflation and supply shortages .

Unemployment claims, which can be volatile during vacation periods, will be closely watched in the coming weeks for any sign that the Omicron variant is pushing employers to lay off workers. Claims data, which is reported weekly, is often an early signal that hiring, and the economy in general, is changing.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, expects Omicron to hold back growth less than the Delta Wave earlier in 2021, as long as the newer variant causes less severe disease, and in part due to new antiviral treatments.

Mr. Shepherdson expects employers to create an average of 450,000 jobs per month in 2022. That would only be a modest slowdown from this year, when U.S. employers added an average of 555,000 per month, or 6.1 million jobs in the first 11 months of 2021, according to the Ministry of Labor. This year’s employment increase is already the largest on record since 1940.

Mr Shepherdson’s forecast is also well above the 168,000 monthly average jobs in 2019, before the pandemic sets in. He predicts that the unemployment rate will fall to 3.5%, matching the Federal Reserve’s projection for the end of next year. The unemployment rate was 4.2% in November.

A recruiter spoke to job seekers at a job fair in Miami earlier this month.


Photo:

Eva Marie Uzcategui / Bloomberg News

Much of Omicron’s impact on the economy depends on whether the variant causes hospitals to overload, he said. “Under these circumstances, the widely held view in the markets that successive waves of Covid have less of an impact on the economy could easily be reversed. “

However, some economists expect Omicron to prove more damaging than previous outbreaks. Oxford Economics, another forecasting firm, predicts that employment gains, which moderated between June and July, will slow further early next year.

“At the height of the Omicron transmission, we could get very weak jobs that are on the verge of stagnation, due to a sharp slowdown in net job gains in service sectors such as recreation and hospitality. “said Kathy Bostjancic, chief US economist at Oxford Economics. . “This would reflect the reluctance of employers to hire and the cautiousness of employees to work due to deteriorating health conditions.”

Unemployment claims could rise in the coming weeks as the Omicron variant makes people nervous about leaving home to work or shop, triggering layoffs and forcing some workers to quit or delay their job. return to the labor market.

So far, there are only signs of a modest economic impact due to the variant. Airlines flights have been stranded due to shortage of crews, hockey and basketball games have been canceled, some businesses have temporarily shut down or returned to remote work, and public schools have gone into full mode. line only at the beginning of January. Some economists have downgraded growth forecasts for the start of next year.

Another constraint on jobs and economic growth next year could be the shrinking workforce, which is nearly 2.5 million fewer workers than before the pandemic. Job vacancies exceeded the unemployed by 3.6 million in October, according to the latest data available from the Labor Ministry.

This has prompted employers to demand workers, raise wages and soften bonuses and benefits, and in some cases seek different types of workers than they had in the past.

Tusco Display is running out of the workers it needs to meet demand, CEO Michael Lauber said. He responded by looking for part-time workers.

“We would still prefer to hire people full time,” said Lauber. “But there are a substantial number of people who for some reason – maybe it’s elder care, maybe it’s childcare, maybe whatever – not are not able or willing to hold a full-time position. “

The Gnadenhutten, Ohio company, which makes custom store displays, has stepped up student recruitment, with nine high school students joining Tusco to do light assembly work in the afternoons and evenings last week. The company also recently recruited a trio of young welding students from vocational training programs. Mr Lauber said he hopes to expand that team in 2022.

To help fight Omicron, the Biden administration is opening more Covid-19 test sites and providing 500 million tests to Americans. Daniela Hernandez of the WSJ explains why testing is still a pain point in the United States, two years after the start of the pandemic. Photographic illustration: David Fang

However, labor supply constraints and the evolving pandemic are not expected to derail improvements in the labor market in 2022, said Bernard Baumohl, global chief economist at the Economic Outlook Group LLC. .

“We expect the economy to continue to be strong,” he said. “And as a result, the demand for workers will also remain strong.”

Workers have gained influence, he said, and that means they have become selective in the types of job opportunities that are right for them. Self-employment has also increased.

“They are entrepreneurs and they started their own business at a time when they thought they now had the financial resources to do so,” Baumohl said.

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Phil Rice, of Roanoke, Texas, spent approximately 20 years in corporate finance, working for companies in the travel industry such as American Airlines Group Inc. and Expedia Group Inc. Mr. Rice was considering starting his own business. insurance for some time. “Then Covid came along and really solidified that,” he said.

Mr. Rice, 50, left Expedia, an online travel reservation company, in late August and plans to open his business in February after completing the necessary training. He is making the switch to work more directly with consumers.

“I’m excited, because I can make all the decisions,” Rice said. “But at the same time, I’m also anxious because I also have to make all the decisions.”

Write to Gwynn Guilford at [email protected]

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