Filings for jobless claims increased at the start of the year as businesses contended with Omicron-related disruptions and adjusted workforces following the holiday hiring season.
Initial claims for unemployment benefits, a proxy for layoffs, rose by 55,000 to 286,000 during the week that ended Jan. 15, following an increase in the week ended Jan. 8. The four-week average, which smooths out volatility, was 231,000, an increase of 20,000 from the previous week’s average.
The number of new claims is the highest since October, but economists cautioned that fluctuations in the numbers are likely in the coming weeks. While the surge in Covid-19 cases is disrupting businesses and leading economists to mark down 2022 growth forecasts, few expect it to change the fundamentals of a labor market with little slack and red-hot demand for workers.
“As we have gotten lower and lower in jobless claims, we should expect some volatility,” said Nela Richardson, chief economist at the human-resources software firm Automatic Data Processing Inc. “It’s never a straight line.
“Someone who’s dependable, who’s been on the job for a year and doesn’t need to learn the ropes—you don’t want to lay that person off when you’re expecting a spring thaw” in economic activity, she added.
The claims increase came as almost 8.8 million adults in the U.S. in early January said they couldn’t work because they were sick with or taking care of someone sick with Covid-19, according to a Census Bureau survey. That is by far the highest such figure in the “household pulse” survey, exceeding 6.6 million recorded last January.
The bureau started the periodic surveys at the outset of the pandemic to help measure its impact. While the survey has evolved through several phases and the measures aren’t perfectly comparable over time, the latest numbers reflect the Omicron wave’s impact on the country.
Continuing claims, which provide an approximation of the number of people receiving benefits, rose by 84,000 to 1.64 million in the week ended Jan. 8, the most recent reading for those figures.
In the broader labor market, wages grew by 4.7% in 2021, and the unemployment rate has dropped to 3.9%, according to the Labor Department. American workers were quitting an average of more than four million jobs a month during the second half of last year through November. The tight labor market has given lower-wage workers, in particular, increased leverage in the workplace.
Quits and job openings are reported with a several-week lag, and there is some evidence that the surge in Omicron Covid-19 cases has slowed growth in job postings by employers, according to the jobs site Indeed.
While the number of job postings is still around 60% higher than the pre-pandemic baseline, the weekly average dropped by 1.3 percentage points for the week ended Jan. 14. Indeed economist AnnElizabeth Konkel attributed that drop to two factors: Lots of people are out sick, including employers tasked with making hiring decisions, and “uncertainty about consumer demand means it’s hard for businesses to determine how many workers to hire.”
A complicating factor for employers and policy makers is the labor-force participation rate, which measures the share of the working-age population that is either employed or seeking employment. Though it has ticked up in recent months to 61.9%, it remains below the 63.4% level from February 2020.
Reduced savings and a rising share of household debt relative to income may bring more workers off the sidelines, especially given the expiration of many federal support programs, including enhanced unemployment benefits and more recently the beefed-up child tax credit, which Congress hasn’t extended.
“What’s missing in action here is any scent of federal stimulus which might delay a person’s decision to go back to work. That’s going to catch up to working families,” Ms. Richardson said.
The Federal Reserve, meanwhile, is attempting to chart a course out of the worst inflationary period in four decades. Part of the process involves trying to pinpoint when the labor market is truly out of slack and has hit full employment, or whether more workers are likely to return to the workforce as pandemic worries like the threat of infection, inconsistent child-care availability and reduced service-sector demand dissipate.
“If Omicron is truly the last major wave of the pandemic and life returns to normal by March, the second quarter should see a solid rebound in economic activity,” said David Kelly, chief global strategist for JPMorgan Funds. “However, if Covid lingers, it could continue to restrain leisure and entertainment spending and labor supply throughout the year.”
Write to Gabriel T. Rubin at gabriel.rubin@wsj.com
—Jeffrey Sparshott contributed to this article.
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