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U.S. sees strong job gains in January despite Omicron surge

Click to play video: 'Global News Morning Market and Business Report – Feb. 4, 2022' Global News Morning Market and Business Report – Feb. 4, 2022
Canaccord Genuity Wealth Management's Clinton Orr talks about market numbers for Amazon, and the latest on U.S. and Canadian job numbers. – Feb 4, 2022

The U.S. economy created far more jobs than expected in January despite the disruption to consumer-facing businesses from a surge in COVID-19 cases, pointing to underlying strength that should sustain the expansion as the Federal Reserve starts to raise interest rates.

The Labor Department’s closely watched employment report on Friday also showed job growth in December and November was stronger than initially estimated. The upbeat report ended days of anxiety among economists and White House officials who had frantically tried to prepare the nation for a disappointing payrolls number.

Read more: Canada lost 200K jobs in January amid Omicron-driven shutdowns

“It confirms that each successive wave of the virus is having a smaller and smaller impact on activity and labour demand,” said Brian Coulton, chief economist at Fitch Ratings.

Nonfarm payrolls increased by 467,000 jobs last month, the survey of establishments showed. Data for December was revised higher to show 510,000 jobs created instead of the previously reported 199,000. Economists polled by Reuters had forecast 150,000 jobs would be added in January. Estimates ranged from a decrease of 400,000 to a gain of 385,000 jobs.

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Part of the broad increase in payrolls likely reflected low layoffs after the holiday hiring season because of worker shortages. Actual employment in January typically falls, but the model used by the government to strip out seasonal fluctuations from the data accounts for this by adding about 3 million jobs to produce the seasonally adjusted figure.

The government also reported that 374,000 more jobs were created in the 12 months through March 2021 than previously reported. The labour market resilience could alter expectations that economic growth would slow significantly in the first quarter after robust growth in the fourth quarter.

It also clears the way for the U.S. central bank to raise interest rates in March to tame high inflation. Economists expect as many as seven rate hikes this year.

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Economists had been bracing for a weak jobs report as the government surveyed businesses for payrolls in mid-January, when Omicron infections were peaking. The Labor Department estimated that 3.616 million people who had a job were not at work during the survey week because of illness.

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Workers who are out sick or in quarantine and do not get paid during the payrolls survey period are counted as unemployed in the establishment survey even if they still have a job.

Lower-paid hourly workers in industries like healthcare as well as leisure and hospitality, who typically do not have paid sick leave, bore the brunt of the winter COVID-19 wave.

According to the latest government data, paid sick leave was available to 79% of civilian workers in March 2021.

The leisure and hospitality industry added 151,000 jobs in January. Healthcare employment increased by 18,000. There were gains in retail, professional and business services employment as well as transportation and warehousing, and wholesale trade. Manufacturing payrolls rose by 13,000, but construction employment fell 5,000, likely because of freezing temperatures.

U.S. stocks were mixed in early trading while the dollar rose against a basket of currencies. U.S. Treasury prices fell.

WAGES SURGE

Employment could increase further as coronavirus infections continue to subside. First-time applications for unemployment last week, retreating further from a three-month high touched in mid-January, the government reported on Thursday.

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The United States is reporting an average of 354,399 new COVID-19 infections a day, sharply down from the more than 700,000 in mid-January, according to a Reuters analysis of official data.

The government introduced new population controls for the household survey, from which the unemployment rate is derived. The jobless rate was at 4.0 per cent in January. The new population assumptions caused a break in the series.

Read more: Businesses indirectly hit in lockdowns slipping through cracks of COVID supports

January’s jobless rate and other ratios from the household survey are not directly comparable to December. The labour force participation rate, or the proportion of working-age Americans who have a job or are looking for one, was at 62.2 per cent.

With some lower hourly paid workers at home, wage growth accelerated in January. Average hourly earnings increased 0.7 oer cent, which raised the annual increase to 5.7 per cent.

(Reporting by Lucia Mutikani Editing by Andrea Ricci, Chizu Nomiyama and Paul Simao)

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