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November Likely Saw Strong Job Gains, but Omicron Threat Looms

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November Likely Saw Strong Job Gains, but Omicron Threat Looms

Lower Covid-19 case numbers likely helped propel the U.S. economy and powered strong job gains in November, economists say, but the new Omicron variant could jeopardize that progress.

Economists surveyed by The Wall Street Journal estimate that employers added 573,000 jobs in November, roughly on par with October. The unemployment rate is expected to tick down to 4.5% from 4.6%. The Labor Department is schedule to release November employment figures at 8:30 a.m. Eastern time Friday.

The economy over the past couple of months appears to have rebounded from a summertime slowdown caused by the Covid-19 Delta variant and supply-chain disruptions.

Employers added 531,000 jobs in October, a sharp increase from September. Household spending also picked up 1.3% in October from the previous month, outpacing inflation, as a strengthening labor market and accumulated household savings prompted consumers to splurge.

Now, the Omicron variant threatens to slow that momentum, depending on how easily it spreads and responds to vaccines, treatments and past infection. Another surge in cases could make people nervous about leaving the house to work or shop, resulting in slower economic growth.

“Just as Delta derailed the recovery in terms of the labor market, if Omicron behaved like that, I would guess it would hold back any recovery in the labor market,” said Justin Weidner, an economist at Deutsche Bank.

Since the Omicron variant was first identified last month, scientists have been trying to assess how dangerous it may be.

Healthcare officials, policy makers and financial markets are nervous. Speaking Tuesday before Congress, Federal Reserve Chairman Jerome Powell said Omicron could pose a risk to the recovery and exacerbate inflation pressures.

“Greater concern about the virus could reduce people’s willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions,” he said.

Nevertheless, a strong employment report Friday could add pressure on the Fed to accelerate its timeline for pulling back support for the economy, said Stephen Stanley, chief economist at Amherst Pierpont. In his remarks to lawmakers, Mr. Powell suggested officials could speed up the pace of winding down asset purchases, which could set the stage for a rate increase early next year.

“It feels like the default at this point is to go ahead and accelerate,” Mr. Stanley said.

Fear of getting sick has been a persistent deterrent to the labor market’s recovery. Faced with strong consumer demand, employers are clamoring for workers, raising pay and sweetening bonuses and benefits.

But many potential employees, whose bank accounts have benefited from rounds of stimulus, have been slow to get back into the workforce. Businesses in some parts of the U.S. also have reported worker resistance to vaccination mandates as a condition of employment, according to the Fed’s most recent Beige Book report on regional economic conditions.

The labor force remains smaller than it was before the pandemic. Roughly 81.9% of people aged 25 to 54 were working or looking for work in October, down from 83.1% in February 2020, before the pandemic hit the U.S. hard. Overall, roughly three million fewer people are in the workforce than before the pandemic.

The shortage of workers has driven up average wages, which has contributed to rapidly rising inflation. Economists expect private-sector wages rose 5% in November over the previous year, well above the months before the pandemic when annual wage increases hovered just above 3%.

Demand for workers is also high, with job openings holding well above pre-pandemic levels for much of the year. And 58% of consumers surveyed last month by the Conference Board said jobs were plentiful, a record in the survey’s 43-year history.

At Thompson Hospitality, which operates more than two dozen restaurants mostly in Maryland, Washington, D.C., and Virginia, managers raised wages over the summer and started offering benefits such as a sign-on bonus, a vacation plan and tuition reimbursement to prospective hourly employees.

“It was difficult, especially over the summer,” said Edie Freeman, the company’s senior vice president of human resources. “We had to get creative in sourcing that talent.”

The company has hired 1,500 people so far this year and is looking for more. It is planning to open 19 new restaurants next year.

For now, economists expect the economy to expand at a healthy pace in the final quarter of the year and that any impact from the Omicron variant would be modest.

Recent economic figures reflect a buildup of strength. The number of new applicants for unemployment benefits, a proxy for layoffs, fell to the lowest level in more than 50 years in mid-November, suggesting a hot labor market. A survey of manufacturing purchasing managers by the Institute for Supply Management last month found a majority of firms with open positions, and many said they were having difficulty filling the jobs.

A couple of weeks ago, Chelsea Ortiz started a new job as a certified nursing assistant at a hospital in the Las Vegas area. Ms. Ortiz, 26 years old, lost her job at a call center at the start of the pandemic and struggled to find work. After a while, she gave up.

“I got discouraged,” she said. “It just took a toll on my mental health.”

Eventually, she found a program through Goodwill of Southern Nevada that trained her for her current job. Now she is thinking about going to school to become a registered nurse.

 

David Harrison

Πηγή: wsj.com

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