US jobless claims trend down as Omicron disruptions begin to ease


First-time unemployment filings ticked lower for the first time in four weeks after notching a three-month high in the previous reading, suggesting some of the Omicron-related disruptions that have recently weighed on the labor market's recovery may be easing.

The Labor Department released its weekly jobless claims report at 8:30 a.m. ET on Thursday. Here were the main metrics from the print, compared to consensus estimates compiled by Bloomberg:

  • Initial jobless claims, week ended Jan. 22: 260,000 vs. 265,000 expected and upwardly revised to 290,000 during the prior week

  • Continuing claims, week ended Jan. 15: 1.675 million vs. 1.655 million expected and downwardly revised to 1.624 million during the prior week

The agency’s latest print fell to a better-than-expected 260,000 from the previous week's figure, which reflected the third straight increase for initial jobless claims and another dent in the months-long downward trajectory of filings. Claims from the prior read came in near the 300,000 level at 286,000 in an unexpected jump from the revised tally of 231,000.

A rush in U.S. workers applying for unemployment insurance was attributed to disruptions from the Omicron COVID-19 variant and adjusted workforces following the seasonal hiring increase during the holidays. In December, claims reached a half-century low of 188,000 as employers attempted to retain workers amid labor shortages.

“The surge in COVID cases has created new headwinds for the economy even as tailwinds, including the federal government’s fiscal boosts, are waning,” Bankrate senior economic analyst Mark Hamrick said in a note. “The detrimental combination of supply chain constraints and the shortage, or lack of availability, of workers amid the Omicron surge is weighing on the nation’s economic recovery.”

Continuing claims, which tracks filers still collecting regular state unemployment benefits, we're also up sharply last week to more than 1.6 million.

Even as Omicron’s spread may be slowing, payrolls will be a bit slower to respond to falling COVID cases than the real-time activity data, according to Pantheon Macroeconomics Chief Economist Ian Shepherdson.

The previous week’s snapshot coincided with the survey period for January’s “main” unemployment, set for release in early February. Hamrick pointed out that slowdowns in job creation or restoration in November and December resulted in an average of 224,000 jobs added to payrolls, compared to 537,000 per month for the full year.

“It is hard to make the case for a huge acceleration in hiring this month,” he said.

December’s unemployment report came in at a miss of more than 250,000 at 199,000 vs. the 450,000 jobs added experts had anticipated. Although the labor market posted a 12th consecutive month of job growth, muted hiring in the service weighed on broader employment growth. Economists also suggested January’s report could see more significant Omicron-related impacts to the monthly labor market data.

Despite the recent ebb in labor market recovery, the Conference Board’s recent assessment of consumer sentiment indicated respondents remained optimistic about the labor market recovery in the recent period but less so about conditions in the year ahead. Of participants in the survey responding to the component of the study that tracks perceptions about labor market conditions, 22.7% said they expect more jobs going forward, down from 24.2% in December. Meanwhile, 15.7% expect fewer jobs six months out, up from 14.7%.

“Even as a surge in Omicron cases is temporarily shuttering businesses, consumers’ views about the labor market remain positive, likely reflecting optimism that the effects of the variant will be temporary,” wrote High-Frequency Economics Chief U.S. Economist Rubeela Farooqi in a note.

Here’s a notable fact about the U.S. economic recovery: Inflation-adjusted output last quarter was just 1 percent below where it would have been if the pandemic had never happened.

Here’s another one: Ignoring inflation, the output is 1.7 percent above where it would have been absent the coronavirus.

Those two facts help explain the confusing, contradictory nature of the late-pandemic economy. On the one hand, the recovery has been remarkably swift by both historical standards and compared with what forecasters expected when the crisis began. On the other hand, a surprising surge in inflation is preventing the economy from rebounding more quickly or feeling more normal. And to some extent, the same forces — the remarkable levels of aid provided by the government, and the unusual nature of the pandemic recession itself — are responsible for both trends.

The chart below helps tell the story. Inflation-adjusted gross domestic product (the dark blue line) has rebounded sharply since the early months of the crisis but has yet to return to its pre-pandemic trend. That might not seem too surprising; businesses have mostly reopened, but the pandemic is still restraining daily activities, at least for many people.

But the second line on the chart, in light blue, shows that the story is a bit more complicated than that. In non-inflation-adjusted terms, gross domestic product — in simple terms, everything we make and spend in a given three-month period — has surged significantly beyond its pre-Covid trend. In dollar terms, we are producing and spending as much as ever. But because of inflation, those dollars are worth less than before.

G.D.P. vs prepandemic trend

In nominal terms, economic output has surpassed its prepandemic trend. But adjusted for inflation, it is still lagging.






Change since beginning of 2017












Note: Data is seasonally adjusted.

Source: Commerce Dept.

By The New York Times

The basic story here is simple. The reopening of the economy after the initial lockdowns brought a surge in demand, which was bolstered by the trillions of dollars in aid that the federal government provided to households and businesses. But supply-chain bottlenecks, labor shortages, and other issues meant that businesses couldn’t fully meet that demand. Strong demand plus limited supply is a recipe for inflation.

What happens next is less clear. If companies are able to hire more workers and pick up production, then supply will be able to meet demand. In that scenario, the dark blue line would start to look more like the light blue one — growth would be strong in terms of real output, not just nominal dollars.

But if supplies can’t rebound, then either we will continue to burn off excess demand in the form of inflation, or demand will have to fall. Either scenario would make it harder for the economy to rebound fully from the shock of the pandemic.

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