Workers have been out sick in record numbers, exacerbating labor shortage woes

The latest surge of coronavirus cases powered by the omicron variant has caused extremely high numbers of employees to miss work because of illness, exacerbating the country’s persistent labor shortages and threatening to complicate the labor market’s push toward pre-pandemic employment levels.

Between Dec. 29 and Jan. 10, approximately 8.8 million workers reported not working because they were sick with the coronavirus or caring for someone who was, according to data from the Census Bureau.

Those numbers are nearly triple the levels from the first two weeks of December, before cases had started to peak around the country. They were also the highest numbers since the agency started taking the survey in April 2020—well over last January’s peak of 6.6 million workers out.

The statistics point to the substantial disruption the variant has caused businesses and workers at a key moment in the nation’s recovery.

Inflation, driven in part by supply chain issues and shortages overseas, is wiping out wage gains made by many workers, as the cost of essential goods such as food and gas continue to rise. And businesses in lower-wage fields have complained for months that their operations have been hampered by a shortage of available staff.

“Unfortunately, the biggest issue about omicron is it’s no longer just fear of contagion and aversion to in-person activity, but it’s actually causing acute labor shortages from the sheer number of people who are out sick,” said Diane Swonk, economist at accounting firm Grant Thornton.

Meanwhile, applications for first time jobless claims swelled last week to 286,000—a 55,000 jump from the preceding week’s revised figure, the Labor Department reported Thursday. That’s a three-month high and a sign the omicron outbreak spurred some layoffs and kept more people out of work in January.

Jobless claims are a widely-followed labor market indicator, commonly used as a proxy for layoffs. The new claims drove the four-week moving average up to 231,000, an increase of 20,000.The jump in claims partially reversed a long downward trend. Claims spiked in the early months of the pandemic as businesses panicked in response to the early spread of the coronavirus, then plunged to a 50-year low in November as shortages impacted the labor market.

Last week’s increase brings the weekly claims count to its highest point since October, suggesting the Omicron variant is having a strong impact on the job market.

In recent weeks, reports have documented severe shortages in industries like trucking—a crucial component of the country’s supply chain—port logistics, air travel, food sales and essential services like garbage collection, firefighting and policing.

“This is a different dynamic than we’ve had,” Swonk said of the omicron surge. “The only silver lining is that it tends to go quickly.”

Joseph Brusuelas, economist at the firm RSM, said the absences were bad news for the economy—a sign of just how significant the pandemic’s effects continue to be, regardless of the political appetite for containing it.

“It’s difficult to get a quorum to get anything done because of the number of people who have called out sick,” he said.

He said he expected most firms—as his had—to revise downward their growth projections for the first quarter, saying that activity, like labor market growth and business productivity, and the consumer confidence that powers the economy were likely to take a hit.

“The fact that we’ve entered the third year and this is still with us should be another knock on consumer confidence and reinforce the idea of when will this ever end,” Brusuelas said.

Job creation slowed the last two months of 2021, after a solid year of growth that saw the country surpass expectations and gain back some 6.4 million jobs that had been lost during the pandemic. Brusuelas said the absences could spell trouble for the January report, which will be released in the first week of February.

The absences are another reminder of how closely related the public health picture is to the country’s economic growth, he said. Workers and businesses headed into this wave with few of the supports they had during previous ones, including tax incentives for paid sick leave programs and government loans.

“This is not the first variant and may not be the last,” Brusuelas said. “[With] more proactive public health measures to help individuals and households mitigate risk, the better the economy will be.”