New filings for U.S. jobless benefits last week rose to 230,000 from 207,000 the week before, exceeding the average pre-pandemic level for the first time in six weeks as the impact of the omicron variant began to be felt in the labor market.
The unexpected increase in new claims was also influenced by seasonal factors that added about 81,000 claims—or 25.7%— on a seasonally adjusted basis, according to data from the Labor Department on Thursday.
We remain cautious when interpreting the headline number because such seasonal factors often lead to distortions in the data that will not be revised until Presidents Day.
Beyond these factors, though, Thursday’s report was notable because for the first time the data showed the effect of the omicron variant. New York, for example, which has been hit hard by the fast-spreading virus, recorded the largest increase in new claims for unemployment benefits, with 8,812 for the week ending Jan. 1.
Nearby states like Pennsylvania and Connecticut, where cases have reached an all-time high, also recorded large increases in new claims, up by 6,772 and 6,020, respectively.
The omicron variant has caused employees to miss work, either out of fear of getting sick or because they have COVID-19 themselves, at such a level that it is starting to disrupt businesses.
While absenteeism does not always translate into layoffs, if it persists for a long period, it might be too much to handle for businesses, especially for smaller ones that cannot afford to lose too many workers.
The tight labor market, though, will act as a counterbalance as businesses, wary of losing staff, scramble to retain their workers.
In the coming weeks, the impact of the omicron variant will become more evident in the labor market as it spreads to other regions.
Inside the report, the total number of continued claims for jobless benefits for the week ending Dec. 25 was 1.95 million, up by 226,264 from the prior week, and down sharply from 19.38 million a year ago amid broader economic restrictions.
For the second week in a row, no claims on pandemic-related programs were recorded as the program expired in early September.