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Will December’s Job Growth Last? Omicron Might Hold the Answer

The private sector added 807,000 jobs in December, new data shows.

December’s positive numbers came on the heels of the November’s 505,000 increase in jobs, according to ADP’s latest report.  On top of that, December’s increase more than doubled the estimates calling for 360,000 to 375,000 jobs, the payroll processor found.

“December’s job market strengthened as the fallout from the Delta variant faded and Omicron’s impact had yet to be seen,” ADP chief economist Nela Richardson said. “Job gains were broad-based, as goods producers added the strongest reading of the year, while service providers dominated growth. December’s job growth brought the fourth quarter average to 625,000, surpassing the 514,000 average for the year. While job gains eclipsed 6 million in 2021, private sector payrolls are still nearly 4 million jobs short of pre-COVID-19 levels.”

Leisure and hospitality added 246,000 jobs, while trade, transportation and utilities added 138,000, the professional and business sector grew with 130,000, and “other services,” which includes retail jobs, added 36,000. Manufacturing payrolls swelled by 74,000 jobs, ADP said.

Large companies with 500 or more employees drove hiring growth, adding 389,000 jobs to their payrolls last month. Firms employing 50 to 499 added 214,000 jobs, while small businesses, those with fewer than 50 employees, increased payrolls by 204,000.

The Labor Department’s report on December’s job market stats, set to publish Friday and encompassing government jobs, is expected to show that payrolls added 400,00 jobs, stronger than November’s addition of 210,000 jobs.

The ongoing Omicron-fueled Covid surge could dampen hopes that this growth will continue, though the National Retail Federation (NRF) believes retail could gain from the latest uncertainty.

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“Little is certain about omicron’s impact on consumer demand, but people who stay at home because of the variant are more likely to spend their money on retail goods rather than services like dining out or in-person entertainment,” NRF chief economist Jack Kleinhenz said Wednesday. “That would put further pressure on inflation since supply chains are already overloaded across the globe.”

Omicron isn’t likely to spark the widespread shutdowns that marked the pandemic’s first wave in early 2020. “What we have learned is that each successive variant has slowed down the economy but that the degree of slowdown has been less,” Kleinhenz said.

Meanwhile, economists and Wall Street analysts will monitor the Labor Department’s nonfarm payroll report to gauge when Federal Reserve Chairman Jerome Powell might raise interest rates, which could come as soon as March.

Some retailers seem to have begun staffing up to prepare for a return to normalcy. Walmart hired 200,000 in the third quarter. Target brought in 100,000 seasonal workers for the holidays, with the option for some to stay on permanently. In addition to increasing payrolls, several retailers raised their minimum wages to effectively compete for talent.