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Economic Report: U.S. businesses shed 301,000 jobs in January, ADP says, in biggest drop since start of pandemic


The numbers: Privately run U.S. businesses reduced employment by 301,000 jobs in January –- the biggest drop since the start of the pandemic— as a record omicron wave kept people out of work and delayed hiring plans. 

Economists surveyed by The Wall Street Journal had forecast a 200,000 gain.

The decline was the first in 13 months and the largest since April 2020, when the U.S. lost almost 20 million jobs during an economic lockdown in the early stages of the pandemic.

ADP sometimes acts as a preview for the U.S. Labor Department’s broader employment survey that comes out a few days later. Yet the two reports have often been at odds during the pandemic and ADP has been less reliable as a bellwether.

Still, economists expect the government’s official tally to be similarly weak on Friday owing to the omicron disruptions. Some also predict an outright decline.

Big picture: Businesses are eager to fill a record number of open jobs and keep up with strong demand for their goods and services. There are almost 11 million job openings in the U.S., a government survey shows.

The problem is finding enough people to fill all the empty positions. Several million workers who left the labor force early in the pandemic have not returned and many may never do so. Frequent coronavirus outbreaks have also made it harder for some people such as women or caregivers to return to work.

The good news? Omicron is fading fast and business leaders says hiring and employment should rebound soon.

Key details: Almost every major segment of the economy suffered in January.

The biggest decline in employment took place at small companies that mainly provide services: hotels, restaurants, entertainment venues, transportation services and so forth. Small businesses lost 144,000 jobs.

Customers stayed away due to business restrictions or fear of catching the coronavirus.

Employment also fell by 98,000 at large companies and 59,000 at midsized businesses during the omicron surge. A separate government report found that nearly 9 million people — a record — missed time from work in January.

Before the ADP report, economists polled by The Wall Street Journal were predicting the U.S. Labor Department’s own tally would show an increase of 150,000 new jobs in January. These figures include government employment.

Looking ahead: “There is no telling how close ADP’s initial January estimate will prove to be to the figures that will be reported by the Labor Department on Friday,” said chief economist Joshua Shapiro of MFR Inc.

“With infection numbers and hospitalizations now falling in many parts of the country as quickly as they had risen, we expect a huge rebound in payrolls in February,” said senior U.S. economist Michael Pearce of Capital Economics.

Market reaction: U.S. stocks DJIA, +0.05% SPX, +0.55% were set to open higher in Wednesday trades.

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