The omicron wave of the coronavirus crashed hard into Tim Niver's three restaurants in Minnesota's Twin Cities this year, as every employee out sick increased the threat of a lengthy shutdown.
The health crisis was too much for one of those businesses: Minneapolis Mucci's Trattoria, which opened in 2019, will permanently close on Jan. 29. His other two restaurants have survived staffing issues so far.
"It seems like every day there is a new decision to make and it is often: Can we be open or not?" Niver said in an interview.
The kind of labor market devastation experienced by Niver is likely to resonate for months after omicron's peak throughout much of the U.S. The spread of the variant has caused temporary shutdowns of restaurants, museums and other businesses and forced school closures as workers called in sick. January will probably be the worst month for the U.S. job market since December 2020, when over 300,000 jobs were lost.
"Job growth is likely to be weak in January," said Augustine Faucher, chief economist of The PNC Financial Services Group.
The numbers of both new and existing job postings at indeed.com have been in decline since early January.
"It seems likely that omicron is having an effect there," said Nick Bunker, economic research director for North America at the Indeed Hiring Lab.
The falloff has been felt throughout the economy. New postings for jobs with a lot of interaction with the public, particularly in food service and hotels, have been the most impacted,
"If you have a huge chunk of your HR department out sick, you probably didn't bring many new workers on," House said.
Jobless claims
PNC's Faucher expects that about 50,000 jobs were created in January, down from 199,000 in December and well below the 2021 monthly average of about 538,000. A decline in jobs is possible for January after the U.S. Labor Department reported the number of Americans filing jobs claims for the week ended Jan. 15 rose to the highest level in three months, Faucher said.
Those jobless claims are a reflection of the variant's spread, as many businesses were forced to shut down, both due to staff illnesses and a decline in customers, said James Knightley, chief international economist with ING.
About 1.68 million employed Americans were unable to work in December 2021 due to illness, the highest number since January 2021. That number will surge in January, economists said.
The timing is terrible for many of these businesses that have been struggling to hire and retain staff for months.
"In an environment where there were 10.5 million job vacancies in November [2021], and where wages are moving higher, you don't want to lose staff if you don't have to," Knightley said.
Participation rate dip
As of Jan. 10, nearly 8.8 million Americans reported that they could not work because they either had COVID-19 or were caring for someone with it, according to the U.S. Census Bureau's latest household pulse survey. That was a nearly threefold increase in less than a month, the data shows.
This will likely keep the labor participation rate low relative to pre-pandemic levels, said House with Wells Fargo.
"People who were planning to come into the labor market, they just didn't look for work because they were sick," House said.
The labor participation rate, which measures the percentage of the population that is either working or actively looking for work, was at 61.9% in December 2021, compared with 63.4% in February 2020.
Much of the decline was due to Americans dropping out of the labor force because they were concerned about COVID-19, Faucher said. With omicron peaking, the worst labor market impacts of the pandemic may have already hit.
"The good news is that demand for labor remains strong and job growth should pick up again over the next few months as the omicron surge fades," Faucher said. "The labor force participation rate should increase over the course of 2022 as people feel more comfortable working, childcare centers reopen, and schooling returns to in-person."