WASHINGTON Reuters - Record numbers of U.S. workers leaving their jobs and a slowdown in hiring at front-line businesses may show that the latest wave of COVID 19 is harming labor supply, possibly pushing the Federal Reserve further toward concluding that employment is near its practical limits.
Employment was slipping through December due to the record outbreak of coronaviruses caused by the Omicron variant, according to Hiring data tracked by Small Business Payroll Management firm Homebase.
It fell sharply by about 15% in the last days of 2021, and the decline was deeper than the roughly 10% drop seen last year, while a seasonal dip was expected between Christmas and the end of the year. Graphic: Jobs in real time, https: graphics.reuters. At the same time, new government data showed that workers walking away from jobs in record numbers, particularly from lower-paid and often front-line service sector positions where health risks are considered more acute and work from home options less available.
With job openings still near record levels and consumer demand keeping up despite the wave of infections, economists say that it could mean more pressure on companies to raise wages and more pressure on the Fed to declare that its goal of maximum employment was close to being met, if not exceeded already.
The goal is one of the U.S. central bank's precursors to raising interest rates, and policymakers at the Fed's December 14 -- 15 meeting indicated they felt that key benchmark was close. The minutes of the meeting are scheduled to be released on Wednesday, providing more details of the Fed's fight against inflation that is nearly three times higher than the target rate of 2% a year, and laid the groundwork for an interest rate increase as early as March.
According to an article published on Medium, Minneapolis Fed President Neel Kashkari, prominent among Fed officials who wanted to delay interest rate increases in hopes of encouraging more job growth, said that he had penciled in two rate hikes for 2022, because of doubts about how many people will be willing to return to work soon.
Kashkari wrote in explaining the change in his policy outlook, he said that the wages are now climbing rapidly across various income categories. The labor market has not fully recovered from the COVID 19 shock, but how long it will take for all of the previous workers to return is not known. Demand for workers exceeds supply, at least for now. The U.S. Labor Department is due to release its December employment report on Friday.
The economy and the Fed are in flux as a result of the wave of Omicron infections. Some analysts have trimmed their economic growth forecasts for 2022 because of the latest turn in the pandemic, but not by much given the scale of infections that are now eclipsing previous outbreaks.
The new variant appears less dangerous as the case count and hospitalizations are not increasing as much as the case count - and data on air travel through December did not show consumers racing to self-isolate. Graphic: Air travel is steady, https: graphics.reuters. More than 1.5 open jobs were available for everyone who declared themselves unemployed, a record that shows the labor market's wage growth is poised to continue as workers quit for better conditions, higher pay, or to avoid getting sick, according to the USA-ECONOMY PIVOT.png As of the end of November, there were more than 1.5 open jobs for each person who declared themselves unemployed.
Nick Bunker, an economic research director for the Indeed Hiring Lab, said that lots of quits mean stronger worker bargaining power, which will likely feed into strong wage gains. In 2021, we are hoping to see more of the same in 2022.