Job Growth Soars, Despite Omicron

Biden Remarks on January 2022 Jobs Report
Pool/ABACA
By Yuval Rosenberg

Yay, it’s the weekend! And the
Winter Olympics have started in China. Before you settle in to
watch some hot curling action, here’s what you need to
know.

Job Growth Soars in January, Despite Omicron

Defying expectations of another Covid slowdown, the U.S. economy
added 467,000 jobs in January, the Labor Department reported
Friday.

Officials also announced huge upward revisions to previous
reports, raising the December job gains figure from 199,000 to
510,000 and the November figure from 249,000 to 647,000 — for a
total of 709,000 additional jobs. The latest numbers indicate that
the U.S. has now regained about 19 million of the 22 million jobs
lost during the pandemic.

Although the unemployment rate rose slightly to 4% — a result of
more people entering the job market, with the labor force
participation rate climbing to an expansion-high of 62.2% — experts
say the latest report shows an economy that is running red hot,
largely dodging the effects of the omicron variant of Covid-19 as
the recovery from the pandemic plows ahead. The tight labor market
boosted wages, which rose 5.7% in January on a year-over-year
basis.

Much less damage than feared: “We had expected Omicron to
lead to a spike in unpaid sick-leave during the payroll week that
would be a drag on nonfarm payrolls,” Bank of America’s Stephen
Juneau said in a research note. “That obviously didn't
manifest.”

Instead, payrolls grew even as millions of workers reported
illness in January; contrary to expectations, those illnesses did
not translate into job losses. And the sectors that were expected
to get hit hardest by the omicron wave, including retail and
leisure and hospitality, showed positive growth during the
month.

There were questions, however, about the revisions made by the
Labor Department that had a big impact on the report. The large
increases in the number of jobs in November and December were
driven in part by adjustments to the model used for seasonal hiring
and firing, and the same adjustments reduced the number of jobs
reported earlier in the year, though the full-year effect was still
positive.

Stephen Stanley, chief economist at Amherst Pierpont Securities,
said the report was “a crazy mess” in some respects, but most
economists agreed that the positive results reflect real gains. “I
don’t think anybody would dispute that we’re moving in the right
direction,” Valerie Wilson of the left-leaning Economic Policy
Institute told
The Washington Post.

Biden celebrates: After spending much of the week
preparing the press for a weak or even negative report, the White
House quickly shifted into a celebratory mode.

“America’s job machine is going stronger than ever,” President
Joe Biden told reporters. “I know it hasn’t been easy. I know that
January was a very hard month for many Americans,” he added. “But
here’s the good news: We have the tools to save lives and to keep
businesses open, keep schools open, keep workers on the job and
sustain this historic economic comeback.”

Labor Secretary Marty Walsh said the report shows that “America
is getting back to work.”

The Fed will take notice: The strong jobs report will do
nothing to discourage the Federal Reserve from raising interest
rates starting in March. The only question is whether the strong
job growth will inspire the central bank to raise rates more
quickly.

“The data today were noisy, but the report was a very strong
positive surprise that provided further evidence that the Fed has
met its maximum employment mandate,” BofA’s Juneau said. “Overall,
we think today's report keeps the Fed on track to hike rates by 25
[basis points] at every meeting this year.”

House Passes Bill Providing Billions to Compete With China,
Boost Research

The House on Friday passed a broad bill aimed at boosting
competitiveness with China and increasing federal support for
scientific and technological research. The vote sets up a potential
showdown with the Senate, which approved its own more modest
version of the legislation last year.

The House bill, called the America COMPETES Act of 2022,
authorizes hundreds of billions of dollars for research and
development, including $52 billion for incentive programs to ramp
up U.S. production of computer chips, helping to combat a global
shortage that has plagued the tech and automotive industries and
fueled inflation. It also provides $45 billion over six years to
address supply-chain problems and support domestic
manufacturing.

House Speaker Nancy Pelosi (D-CA) said the bill “will ensure
that America's pre-eminence in manufacturing, innovation and
economic strength, and can outcompete any nation.”

The 222-210 House vote fell almost entirely along party lines.
One Republican, Rep Adam Kinzinger of Illinois, joined Democrats in
supporting the measure, while one Democrat, Rep. Stephanie Murphy
of Florida, voted no, citing concerns about the trade provisions in
the bill. “This bill is going to arrive in the Senate DOA, and
because it is so chock full of progressive, protectionist policies
that will never make it through the Senate,” Murphy said, according
to
Politico.

Republicans, meanwhile, criticized the bill’s trade climate
provisions and said it did not do enough to counter China. “It
wastes billions of dollars on unrelated matters and includes no
measures to make China pay for the chaos they created,” House
Minority Leader Kevin McCarthy told reporters.

What’s next: The House bill must now be reconciled with
the Senate version, the $250 billion United States Innovation and
Competition Act (USICA) of 2021, which passed in a 68-32 bipartisan
vote in June. That may be a challenge, given the
differences between the two bills and stark
partisan divides over some provisions. The compromise version will
need to be approved by both chambers again, meaning it will require
the votes of at least 10 Senate Republicans.

The process could take quite some time though President Joe
Biden on Friday called for the House and Senate to move quickly.
“Business and labor alike have praised this legislation as vital
for continuing the economic momentum we’ve seen over the last year,
and national security leaders from both parties have said that the
investments in this bill are needed if we want to maintain our
competitive edge globally,” he said in a statement. “I look forward
to the House and Senate quickly coming together to find a path
forward and putting a bill on my desk as soon as possible for my
signature. America can’t afford to wait.”

Commerce Secretary Gina Raimondo likewise urged lawmakers to
speed the process, telling reporters it “should take weeks, not
months.”

The cost question: Published reports put the cost of the
2,900-page House bill at up to $350 billion, but the Congressional
Budget Office has yet to issue an official cost estimate, and
budget watchers criticized lawmakers for pushing ahead without
one.

“Maintaining America’s economic standing by improving our
ability to compete with China on research and manufacturing is a
worthy investment, but it should not come at the expense of future
generations saddled with more debt,” Maya MacGuineas, president of
the Committee for a Responsible Federal Budget said in a statement
Thursday. She added that lawmakers “should reconsider whether it is
worth borrowing from China to compete with them and instead fully
offset any proposed increases in spending or reductions in
taxes.”

Why it matters: “The bill’s passage stands to become a
major win for the White House and Democratic leaders, with the
party eager to tackle voters’ rising concerns such as inflation and
supply chain bottlenecks,” Politico’s Gavin Bade and Sarah Ferris
write. “But even its supporters acknowledge that much of the House
bill —
stuffed with Democratic trade priorities to
increase supply chain oversight, expand tariffs and tighten U.S.
trade laws — is unlikely to become law.”

Read more
here,
here or
here.

Number of the Day: 900,000

The U.S. death toll from Covid-19 hit 900,000 this week,
according to data compiled by Johns Hopkins University. Driven by
the omicron variant, which is less deadly than previous variants
but far more contagious, the number of fatalities climbed rapidly
in recent weeks, rising from 800,000 in less than two months.

“It is an astronomically high number,” Dr. Ashish K. Jha, dean
of the Brown University School of Public Health, told the
Associated Press. “If you had told most Americans
two years ago as this pandemic was getting going that 900,000
Americans would die over the next few years, I think most people
would not have believed it.”

Send your feedback to yrosenberg@thefiscaltimes.com.
And please tell your friends they can
sign up here for their own copy of this
newsletter.

News

Views and Analysis