White House warns that January’s omicron spike could weigh on next week’s jobs data
White House national economic director Brian Deese speaks during a press briefing at the White House in Washington, U.S., July 2, 2021.
Kevin Lamarque | Reuters
The White House on Friday warned that the omicron-fueled spike in Covid-19 cases in early January could skew the data in next week’s jobs report, as millions of Americans left work due to illness or to care for family members.
Brian Deese, President Joe Biden’s top economic advisor, told CNBC on Friday that the way the Labor Department collects employment data may have a pronounced effect on the January 2022 data and could show a greater number of unemployed people.
“The way that the government samples the data is to take a snapshot in an individual week,” Deese, the director of the National Economic Council, said an interview on “Closing Bell.”
“And if somebody is out sick for that week — even if they have not been laid off, if they weren’t paid getting paid sick leave — they will not be counted as employed,” he added. Americans “need to be prepared for January employment data that could look a little strange.”
Deese’s comments underscored the uncertainty about this month’s employment picture. Economists polled by Dow Jones are expecting a gain of about 200,000 jobs for January, although some analysts on Wall Street are expecting a loss.
The White House does not get access to sensitive economic data, including the monthly jobs report, until the day before it’s released. The data is provided to the Council of Economic Advisers, which often shares it with the president.
But Deese and the staff at the NEC are likely doing analysis of their own ahead of the Labor Department’s release. If the Bureau of Labor Statistics happened to survey Americans on their employment status during the peak days of the omicron variant infections, historical data suggests that January’s net change in payrolls could fall short of expectations or even decline.
“If you think about omicron in early January, and the impact it was having in terms of the number of people who were out sick, we do expect there to be some real variation in the data,” Deese said.
Data already available to the public may suggest a tough month for the jobs report.
The results of the U.S. Census Bureau Household Pulse Survey that was published last week showed that more than 14 million Americans did not work at some point between Dec. 29 and Jan. 10 because they had Covid, or were caring for someone with the virus, or for a child who did not go to school or daycare.
“This is double the number not working due to COVID illness in the Census survey done in early December, and on par with the peak number in the worst of the pandemic this time last year,” Mark Zandi, chief economist at Moody’s Analytics, wrote in a social media post dated Jan. 21.
“With so many workers out, odds are high that the BLS will report employment declined in January. The BLS survey period used to estimate jobs for the month overlaps with the Census survey,” he added.
Those warnings come as a number of Wall Street economists say they expect the January data to prove weaker than in prior months.
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“We reckon that once the data have been revised over the next few weeks, ahead of the official release on February 4, they will be consistent with private payrolls falling by about 300K,” Ian Shepherdson, chief economist of Pantheon Macroeconomics, wrote on Jan. 20. “That said, it’s important to appreciate that the margin of error in all payroll forecasts right now is huge.”
The lingering pandemic makes the job of collecting reliable employment numbers more difficult — and less reflective of the final count after revisions than in pre-pandemic times. The Labor Department has over the past two years has tended to issue larger-than-normal revisions to the preliminary employment data.
The pandemic has also made Wall Street forecasters’ job more difficult and eroded the value of advanced expectations. As of Friday, economists polled by Dow Jones expect the U.S. economy to have added 199,000 jobs in January, while Wells Fargo expects a net decline of 100,000 payrolls. Nomura thinks the decline will be around 50,000 jobs.
“Omicron has weighed heavily on labor supply this month, because of quarantining workers. We see strong downside risks to January payrolls,” Bank of America economist Aditya Bhave wrote on Tuesday. “We note that more than half of those who did not work because they were caring for someone or sick with Covid have a high school degree or less. Since these individuals are more likely to be wage workers, there are meaningful downside risks to January nonfarm payrolls.”
The upside for Wall Street and Washington is that February could prove a strong jobs month if those who were marked as unemployed in January return to work.
“The Omicron shock is likely to be short-lived,” Bhave added. “The increase in those who are not working because of concerns about getting or spreading Covid has been very modest relative to the size of the wave. This suggests that headwind to labor supply from the fear of Covid is generally fading.”
— CNBC’s Michael Bloom, Nate Rattner and Steve Liesman contributed to this report.