Economy is still at the mercy of the public health crisis

Swing and a miss. Expectations had been high for December’s jobs report, particularly since it was calculated from data collected mostly before the recent omicron surge. Forecasters had been expecting more than 420,000 payroll jobs to be added. Instead, we got about half that level, according to the Bureau of Labor Statistics: only 199,000 additional jobs on net.

This is not good news. For a while we were rapidly filling in the huge crater in employment levels created by layoffs during the early months of the pandemic; more recently, progress has slowed a lot. And the vast numbers of Americans forced into isolation because of positive COVID cases over the past several weeks may well halt even that slowed growth, at least temporarily.

As of mid-December, the U.S. economy was “missing” about 3.6 million jobs relative to the employment levels from just before the pandemic began.

To be fair, the December picture isn’t entirely gloomy. A separate government survey released Friday — the one that produces the unemployment rate — was much stronger and suggests the job market is doing better than these payroll numbers indicate. But the payroll survey is a bigger, and usually more reliable, data source, and even after upward revisions in recent months its numbers have still been mediocre.

What might account for these relatively disappointing numbers, and what can President Joe Biden do about them?

There are a few likely factors at play. Even before the recent omicron surge, people were still getting sick and missing work.

In December, 1.7 million people who were still counted as employed said they missed work because of their own illness. That’s nearly 600,000 more people than the number who missed work because of illness in the December right before the pandemic started.

This past December, chronic child-care problems were still wreaking havoc on working parents, thanks to outbreaks at schools and reduced capacity at child-care providers.

Other kinds of disruptions have also made it difficult for workers to resume regular jobs. Public transit is experiencing labor shortages, which mean less reliable commutes for the workers who rely on buses and trains.

Meanwhile, Americans’ priorities have shifted.

Many older workers — spooked by higher on-the-job health risks and buoyed by the recent appreciation in their houses and 401(k)s — have retired early. It’s not clear how many of them will return to the labor force as the economy heals. Younger workers, some of whom are burned out, are also sitting out the labor market for a while, a decision some can afford thanks to accumulated savings over the past couple of years. The health-care industry is suffering staffing shortages both because workers are out sick and because many are quitting.

Also, new immigration has plummeted. Meanwhile, huge numbers of foreign-born workers already here, and employed lawfully, have been losing their ability to continue working because the government has been so slow in processing their applications to renew their work permits. There were about 1.5 million work-permit applications in the backlog as of Sept. 30, more than double the number at the end of 2019.

Among all these factors holding back employment, the legal immigration system is likely the area where the Biden administration has the most power to improve things. The other variables will be more challenging to address. Mostly they come down to getting more vaccine shots (including boosters) into arms, which will reduce infection levels and, just as important, the severity of infections whenever people do get sick.

As of the first half of December, lower-income households were among those least likely to have gotten boosted, according to the Census Bureau’s Household Pulse Survey. That’s an ominous sign for the month ahead, particularly since lower-wage workers are more likely to be employed in public-facing jobs such as food services and hospitality.

Even if this omicron wave recedes quickly, more variants may come. The economy remains at the mercy of the public health crisis, just as it was nearly two years ago.