January’s employment report was very encouraging. While unemployment increased, it did so because people returned to work. Employers hired workers and paid them more. Many economists had expected a lackluster gain or a decline in jobs because of the surge in COVID cases. But instead, the economy continued gaining momentum in its recovery, fueling speculation the Federal Reserve will increase interest rates to slow the economy in March.
The highlights from The Employment Situation – January 2022 are listed below.
People are returning to work. January’s stellar report also noted that November and December’s payroll figures were a combined 709,000 higher than initially reported. The labor participation rate rose above 62% for the first time since March 2020. The participation rate includes workers who are in the labor force because they are either employed or seeking employment. Payrolls increased in most industries – even leisure and hospitality, which rose by 151,000 workers. Payrolls would likely have grown more if it wasn’t for Omicron. The number of people who reported that they could not work because the pandemic forced their employer to close or lose business rose from 3.1 million in December to 6 million in January. Illness forced about 3.6 million workers to be absent from work, more than any time during the pandemic.
Higher compensation, improved health conditions, depleted savings, and less government aid have increased the incentive to work. Wages rose 0.7% in January, the largest increase in a year. But on an annual basis, the growth in earnings remains less than inflation, which means that the average household cannot purchase as much as last year.
The jobs report confirmed the labor market gained much momentum, which has cooled slightly by the Omicron variant. The Labor Department reported nearly 10.9 million jobs are available and 6.5 million unemployed, giving employees the leverage to demand higher wages and the confidence to quit their jobs often to pursue a better offer. These are indications that the labor market is approaching full employment. A continued rapid economic expansion adds inflationary pressure, which makes it very likely the Federal Reserve will increase interest rates in March.
The Bureau of Labor Statistics' report Consumer Price Index - January 2022 will provide valuable insights into the impact of the Omicron variant on inflation and the probability of an interest rate hike in March. Check back to HigherRockEducation.org shortly after its release (February 10) for our summary and analysis.