Filings for jobless claims rose to a seasonally adjusted 230,000 last week, an increase of 23,000, as a tight U.S. labor market has kept applications near pre-pandemic lows for the past two months.
The increase in the Jan. 8 week came as employers dealt with workers calling in sick because of the Omicron variant of Covid-19.
The four-week moving average for last week edged higher, the Labor Department said Thursday, to 210,750 but remains close to the lowest levels on record. Meanwhile, continuing claims, which provide an approximation of the number of people receiving benefits, fell by nearly 200,000 to 1.6 million in the week ended Jan. 1, the most recent reading for those figures.
Economists expect the surge in cases from the Omicron variant to have a limited impact on businesses, keeping the tight labor market in place.
“I don’t see any reason why we’re going to see layoffs go up because businesses keep reporting labor shortages and difficulty hiring,” said Rubeela Farooqi, chief U.S. economist of High Frequency Economics. “They’re going to see some temporary disruption from the surge in cases but we’re going to revert back to a downtrend that we were seeing.”
High demand for labor and a shortage of available workers have helped keep layoffs low. The dynamic has also driven wages higher—4.7% in 2021 the Labor Department said—fueling price increases in some industries, particularly the restaurant and retail sectors.
Omicron has pushed Covid-19 cases and hospitalizations in the U.S. to record highs, with economists predicting the wave is likely to cause a short-term slowing of economic growth.
People staying out of work because they are sick or fear getting sick has disrupted air travel, entertainment and other sectors of the economy while causing schools to temporarily move to remote learning.
“We are talking about absenteeism to a level where some businesses might not be able to operate—if you want to call absenteeism the new lockdown,” Ms. Farooqi said.
Absenteeism—employees missing work unexpectedly—caused by Covid-19 is a particular challenge for smaller businesses that might not be able to afford the missed shifts, Ms. Farooqi said. It could also potentially lead to the risk of layoffs at those smaller firms, she added.
“If you look at your corner pizza store that has already struggled with capacity constraints during Omicron, that is where the risk lies,” Ms. Farooqi said.
Ms. Farooqi said the pandemic’s impact on the overall economy has evolved over time, with the effect easing with each wave of cases. That is because businesses are striving to remain in operation despite the pandemic’s continued challenges, Ms. Farooqi said.
Tracy Wallace, owner of Peacock Wine Bar in Gilbert, Ariz., said she still doesn’t know what times her business will be busy since reopening in September 2020. She said her only choice during the pandemic’s surges has been to keep her business open as much as possible.
“I’ve had to quit watching and thinking about it because it was giving me a lot of anxiety and I could never plan anything.” Mrs. Wallace said, referring to the pandemic. “I had to just keep moving forward because otherwise I’ll just be stuck and not move anywhere.”
The tight labor market has left businesses short of enough workers as consumer demand has been high. Workers are staying on the sidelines of the labor market and quitting jobs at record levels, putting pressure on employers to raise wages and enhance benefits to attract workers.
Higher wages are a factor in rising inflation, which in 2021 grew at its fastest annual pace since 1982.
“Price-wage momentum has already started. Wages have to go up, otherwise you can’t keep your workers, and when you raise your wages, sooner or later you have to raise prices,” said Sung Won Sohn, professor of finance and economics at Loyola Marymount University in Los Angeles.
Write to Bryan Mena at bryan.mena@wsj.com
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