Private US businesses shed 301,000 jobs last month as the Omicron variant of Covid-19 disrupted activity, payroll services firm ADP said Wednesday in a report that was far worse than expected.
“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,” ADP Chief Economist Nela Richardson said.
The decline in payrolls was the first since December 2020, while the data also revised lower by 31,000 the job gains reported in the final month of 2021.
The ADP report is considered a preview of Friday’s government jobs report, which is expected to show weak hiring of less than 200,000 in January as Omicron caused businesses to struggle anew.
Small businesses bore the brunt of the job-shedding, losing 144,000 positions, the ADP data said, which Richardson said had erased most of the job gains made in December 2021.
Large-business employment fell 98,000, while medium-sized businesses lost 59,000.
The service sector accounted for the majority of the job losses, with overall employment falling 274,000.
Most severely hit was the leisure and hospitality sector, which has borne the brunt of past layoff waves and lost 154,000 position in January.
Ian Shepherdson of Pantheon Macroeconomics said ADP can differ widely from the government payroll data, and Omicron’s severity is influencing the latest reports.
“These data, and probably February’s too, will always be asterisked; they tell us nothing about the underlying state of the labor market,” he wrote in an analysis.
“The first fully post-Omicron report will be for March, and recent history suggests all the lost ground won’t be recovered immediately.”
