The Omicron wave led the private sector to cut 300,000 jobs in January, ADP data show. It was supposed to add 200,000

February 2, 2022, 3:32 PM UTC

Employment at U.S. companies declined in January by the most since the early days of the pandemic as the Omicron variant of the coronavirus registered a swift yet likely temporary blow to the nation’s labor market.

Businesses’ payrolls fell by 301,000 last month in a broad-based decline, according to ADP Research Institute data released Wednesday. The median forecast in a Bloomberg survey of economists called for a 180,000 rise.

The decrease in employment, due to a surge in COVID-19 infections that led to some business closures and restrained activity, exacerbates tightness in the job market. A near-record number of unfilled positions and increased employee turnover are contributing to capacity constraints. Still, employment growth is seen picking up as the spread of the Omicron variant wanes.

U.S. stock futures pared gains following the data while 10-year Treasury yields remained slightly lower. 

The data precede Friday’s monthly employment report from the Labor Department, which is currently forecast to show that private payrolls increased by 113,000 in January. The ADP figures don’t always follow the same pattern as the Labor Department’s data.

Broad-based decline

Service-provider employment fell by 274,000 in January, the biggest drop since April 2020, led by leisure and hospitality. Trade, transportation and utilities also posted a sizable decline. 

Payrolls at goods producers decreased by 27,000, reflecting declines in both construction and manufacturing.

“The labor market recovery took a step back at the start of 2022 due to the effect of the Omicron variant and its significant, though likely temporary, impact to job growth,” Nela Richardson, ADP’s chief economist, said in a statement.

Payrolls at companies with fewer than 50 employees dropped 144,000 in the month, while large businesses shed 98,000 jobs.

ADP’s payroll data represent firms employing nearly 26 million workers in the U.S.

—With assistance from Jordan Yadoo and Reade Pickert.

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