US Job Market Suffers Omicron Meltdown As Companies Lose 301,000 Jobs In January

U.S companies bled over 301,000 jobs in January in a shocking blow to the economy as the full impact of the Omicron variant on the economy starts to reveal itself.

On Wednesday, the private payroll processor ADP released its monthly report on job growth. In a grim discovery, it found that the 301,000 jobs that evaporated were completely unexpected with earlier forecasts predicting a gain of at least 201,000 positions. Instead, the economy saw the worst job loss since December 2020 -- the previous winter wave of the COVID-19 pandemic.

At the center of this implosion was the usually robust service sector. For months, service jobs were responsible for the most growth in earlier reports with the leisure and hospitality sector leading the way. According to ADP, jobs in the service sector shed 274,000 positions with leisure and hospitality accounting for 154,000 lost jobs.

The damage was also felt differently depending on the size of the company. Small businesses that employed less than 50 employees bore the brunt of the losses with 144,000 jobs being shed. In contrast, large businesses with 500 or more employees lost only 98,000 positions.

This report is the first illustration of how seriously the Omicron variant has affected the U.S economy to date. For months, companies and government policymakers were cautious about how severely Omicron would cut into the economy, but they held off on any final judgment of its impact.

Nela Richardson, ADP's chief economist, said that the damage wrought by the virus effectively eliminated the job gains seen in December 2021, when the strain first began to spread widely across the U.S. However, she noted that this blow itself may be absorbed and that better days lay ahead for the labor market.

“The labor market recovery took a step back at the start of 2022 due to the effect of the Omicron variant and its significant, though likely temporary, impact to job growth,” said Richardson in a statement.

The ADP report arrives two days before the Department of Labor is expected to produce its monthly non-farm payrolls report. There has traditionally been some variance between the two reports, but the White House has already signaled that it is expecting a more skewed report because of Omicron.

Brian Deese, the director of the National Economic Council (NEC) that advises President Joe Biden, warned last Friday in an interview with CNBC that Americans “need to be prepared for January employment data that could look a little strange.”