Good morning. Here’s Axios chief economic correspondent Neil Irwin and markets correspondent Emily Peck with what you need to know about today’s surprising jobs numbers.
After days of doom-and-gloom talk about how bad the January jobs numbers would be due to the Omicron variant, they turned out to be, um, great?
Employers added 467,000 jobs last month, despite millions out sick.
Why it matters: It’s rare for any jobs numbers to be stunning, but these were. They leave little doubt that this remains a tight job market in which employers are doing everything they can to hold on to their workers.
The big picture: Some of the biggest job gains were in categories that have strong seasonal patterns, normally adding workers in the fall and then cutting those temporary workers in January.
But employers, desperate for staff, appear to have held onto those workers in greater numbers than in a normal year.
Due to the statistical process of seasonal adjustment, “cutting fewer workers than usual for this time of year” gets translated as “adding lots of jobs.”
By the numbers: Leisure and hospitality added 151,000 jobs; retail added 61,000; and transportation and warehousing added 54,000.
Between the lines: The report offered more evidence that this is an exceptionally tight labor market with inflationary pressures brewing, giving the Federal Reserve the green light for interest rate increases.
Average hourly earnings rose a robust 0.7%, and are up 5.7% over the last year. Employers are being forced to pay up to fill their job openings.
Yes, but: Omicron really did have an effect. The report said 6 million people were unable to work because their employers were closed or lost business due to the pandemic, up from 3.1 million in December.
What they’re saying: “Had the prior relationship between Covid cases and employment held true, 800k daily new Covid cases would have led to 2.3 million job losses,” Julia Pollak, chief economist at ZipRecuiter, tweeted. “Instead, we saw 467,000 job GAINS!”
The bottom line: This is an incredibly strong labor market that is poised to strengthen further as Omicron fades.
Covid-19 death rates in the United States are “eye-wateringly” high compared with other wealthy nations—a problem that several health experts say underscores the shortfalls of the country’s pandemic response.
U.S. Covid-19 death rates exceed those of other wealthy nations
According to CDC data, over 880,000 Americans have died from Covid-19 since the beginning of the pandemic—a death toll greater than that of any other country. And during the current omicron wave, Covid-19 deaths are now greater than the peak number seen during the delta wave and more than two-thirds as high as record numbers seen last winter before vaccines were available, the New York Times reports.
Moreover, since Dec. 1, when omicron was first detected in the United States, the proportion of Americans who have died from Covid-19 has been at least 63% higher than other large, wealthy countries, including Britain, Canada, France, and Germany, according to a Times analysis of mortality figures.
Currently, the daily Covid-19 death rate in the United States is nearly double that of Britain and four times that of Germany. The only large European countries to surpass the United States’ Covid-19 death rates have been the Czech Republic, Greece, Poland, Russian, and Ukraine—all of which are less wealthy nations where the most effective treatments may be limited.
“Death rates are so high in the States—eye-wateringly high,” said Devi Sridhar, head of the global public health program at the University of Edinburgh. “The United States is lagging.”
Similarly, Joseph Dieleman, an associate professor at the University of Washington, said the United States “stands out” with its high Covid-19 death rate. “There’s been more loss than anyone wanted or anticipated,” he said.
Vaccination shortfalls plague the U.S.
Lagging Covid-19 vaccination rates among Americans likely contributed to the country’s outsized death toll compared with other nations, several health experts said.
Currently, around 64% of the U.S. population has been fully vaccinated. However, several peer countries, including Australia (80%), Canada (80%), and France (77%), have achieved higher vaccination rates.
Unvaccinated people make up the majority of hospitalized Covid-19 patients, according to the Times, but lagging vaccination and booster rates among vulnerable groups, such as older Americans, has also led to increased hospitalizations.
Around 12% of Americans ages 65 and older are not fully vaccinated, and among those who are fully vaccinated, 43% still have not received a booster shot, leaving them with waning immunity against the omicron variant. In comparison, only 4% of Britons ages 65 and older are not fully vaccinated, and only 9% have not had a booster shot.
“It’s not just vaccination—it’s the recency of vaccines, it’s whether or not people have been boosted, and also whether or not people have been infected in the past,” said Lauren Ancel Meyers, director of the University of Texas at Austin’s Covid-19 modeling consortium.
Similarly, former FDA Commissioner Scott Gottlieb said that the United States‘ lagging vaccination rates compared to the U.K.’s, particularly for boosters, may be due to “protracted wrangling” that “may have sowed confusion, sapping consumer interest.”
How the U.S. could fare in future Covid-19 waves
According to some scientists, the gap between the United States and other wealthy nations may soon begin to narrow. Although U.S. vaccination rates have been slow, the delta and omicron waves have infected so many people that overall immunity against the coronavirus has increased—which could potentially help blunt the effect of future waves.
“We’ve finally started getting to a stage where most of the population has been exposed either to a vaccine or the virus multiple times by now,” said David Dowdy, an epidemiologist at the Johns Hopkins Bloomberg School of Public Health. “I think we’re now likely to start seeing [American and European Covid-19 death rates] be more synchronized going forward.”
However, other experts noted that the United States has other disadvantages that could make future Covid-19 waves difficult. For example, many Americans have chronic health problems, such as diabetes and obesity, that increase the risk of severe Covid-19 outcomes.
Overall, health experts said the impact of future Covid-19 waves will depend on what new variants emerge, as well as what level of death people decide is tolerable.
“We’ve normalized a very high death toll in the U.S.,” said Anne Sosin, who studies health equity at Dartmouth University. “If we want to declare the end of the pandemic right now, what we’re doing is normalizing a very high rate of death.”
The U.S. economy added 467,000 jobs in January as the omicron variant spiked to record heights, with the labor market performing better than many expected two years after the pandemic began.
The unemployment rate ticked up slightly to 4 percent, from 3.9 percent the month before.
The monthly report, released by the Department of Labor, stems from a survey taken in mid-January, around the time the omicron variant was beginning to peak, with close to 1 million new confirmed cases each day. The rapid spread during that period upended many parts of the economy, closing schools, day cares, and a number of businesses, forcing parents to scramble.
But the labor market, according to the new data, performed very well during that stretch.
In addition to the robust January, the Department of Labor also revised upward the figure for December’s jobs report, to 510,000 from 199,000, and November, to 647,000 from 249,000. That means that there were some 700,000 more jobs added at the end of last year than previously estimated — showing a labor market with momentum heading into the new year.
The data sets show a labor market that continues to recover at a strong pace from the pandemic’s worst disruption in March and April of 2020.
New outbreaks and variants have sent shockwaves through the economy since then, but the labor market has continued to return, with companies working to add jobs and wages steadily rising.
The industries experiencing growth in January were lead by the leisure and hospitality sector, which added 151,000 jobs on the month, mostly in restaurants and bars. Professional and business services added 86,000 jobs. Retailers added 61,000 jobs in January, which is typically an off month. Transportation and warehousing added 54,000 jobs.
The labor market’s participation rate, a critical measurement that has never fully recovered from losses during the pandemic’s earliest days, also went up significantly, to 62.2 percent from 61.9 percent. That shows more people are reentering the labor force, looking for work.
Average hourly earnings increased by 23 cents on the month to $31.63, up 5.7 percent over the last year. However, those gains for many people have largely been wiped out by rising prices from inflation.
January is traditionally a weak month for employment when retail and other industries shed jobs after the holiday season. Economists say that seasonal adjustments made to the survey’s data to account for this have the potential to distort the survey in the other direction, given that the holiday shopping boom appeared to take place earlier this year than typical.
As such, predictions for job growth for the month had been all over the map. Analysts surveyed by Dow Jones predicted an average of about 150,000 jobs added for the month, in what would be the lowest amount added in a year. Some economists predicted job losses, of up to 400,000.
Last year was a strong year for growth in the labor market, with the country adding an average of more than 550,000 jobs a month — regaining some 6.5 million jobs lost in the pandemic’s earlier days, after the Department revised its numbers. The country has about 2.9 million fewer jobs than it had before the pandemic, according to the figures released Friday.
“Omicron is going to make it look like things dropped off a cliff in January, but overall they did not,” said Drew Matus, chief market strategist for MetLife Investment Management.
Some economists like Matus say that the prospects for such rapid regrowth are more complicated this year, with the fiscal measures that boosted the economy during the pandemic’s first two years, like generous government aid, and record low interest rates from federal bankers, having largely expired, and the country’s confidence in a virus-free future dented after the winter wave.
Since the rollout of vaccines last year, there have been hopes that a return to a more typical rhythm of life could encourage some of the roughly two million people who have left the labor force during the pandemic to seek work anew, but thus far, continued threats from variants — and uncertainty after more closures of schools, daycares, and office — have prevented this from materializing in a substantial way.
There are signs that the omicron exacted a toll on the economy during its peak.
Weekly unemployment claims swelled mid-month to its highest level since October, though the numbers have come down in the two weeks since. Other statistical markers like passenger traffic at airports, hotel revenues, and dining reservations also took a hit during the month.
Recent months continue to be marked by incredible churn in the labor market, as record numbers of workers are switching jobs. In December, some 4.3 million people quit or changed jobs — a number which was down from an all-time high in November but still at elevated. Employers continue to report near record numbers of job openings: the Bureau of Labor Statistics said they reported some 10.9 million openings last month.
The Great Nursing Resignation, and hospitals’ growing reliance on expensive agency labor (a.k.a. “travelers”) has grabbed headlines, for good reason. But lately we’ve heard a couple of anecdotes from health system leaders about the second-order impacts of the phenomenon that are worth considering as well.
First, as the ranks of agency nurses at hospitals have swelled, full-time employed nurses’ morale has plummeted—tenured nurses are having to orient their new temporary co-workers, then watch them earn up to three times as much money for the same work.
At the same time, willingness to work overtime among employed nurses has dropped. That’s not just because of burnout—it turns out that the nurses who were most likely to take overtime shifts are also more likely to have chosen to leave full-time employment to become travelers, where they are even more richly rewarded for working extra shifts. So, the “productivity” of the remaining corps of staff nurses has dropped, even as caseloads have increased.
One other implication we’ve heard about recently: the economic impact of “observation” cases, where patients are held in a staffed bed but not admitted—already a bad bargain for hospitals—has gotten worse. That’s because the cost of deploying staff to care for those patients has gone up, due to wage inflation and use of travelers. It’s hard to overstate the level of staffing crisis at most hospitals today, and the rapid growth in reliance on temporary staff will have consequences lasting well beyond the current surge.
A thought-provoking piece in this week’s Harvard Business Review about the underrated advantages longstanding industry giants have over disruptors got us thinking about health system strategy. The authors highlighted several companies that have enjoyed sustained success over a century or more, including agricultural behemoth Deere and Company, and shipping giant company A.P. Møller-Maersk, which wielded “strategic incumbency” to successfully innovate and pursue new strategies, leveraging scale, trusted customer relationships, and long-term planning capabilities—attributes that new market entrants often lack when looking to disrupt established consumer channels.
The Gist: In a market where healthcare unicorns constantly garner headlines, the article offers a counterintuitive perspective about the value of incumbency.
Health system leaders might look to the experience of Maersk, which moved from a supply-driven focus (pushing its products to customers), to a demand-driven strategy (navigating customers through logistical pain points), using technology to maximize its vast asset portfolio.
Likewise, health systems have an abundant “supply” of care delivery assets, and now need to build the connective tissue to make the care experience across those point solutions seamless for patients.
The American Hospital Association (AHA) is asking Congress for an additional $25B to help hospitals offset high labor costs, largely incurred by the need to rely on travel nurse staffing firms that charge two to three times pre-pandemic rates. The AHA, along with 200 members of Congress, is urging the Federal Trade Commission to investigate the staffing agencies for anti-competitive activity, although the agency has previously declined to do so.
The Gist: The Department of Health and Human Services (HHS) is now releasing$2B in of provider relief dollars from the CARES Act. Beyond that, after nearly two years and $178B of federal support, hospitals shouldn’t count on additional funds from the government, even as costs of labor and supplies continue to rise.
Instead, we’d expect more scrutinyover how the remaining relief dollars are spent. Federal support during the pandemic has masked structural economic flaws in provider economics, and we expect 2022 will be a year of financial reckoning for many hospitals and health systems.
Physicians employed by group practices owned by health systems are mostly paid based on the volume of care, despite recent insurance companies’ efforts to pay based on quality, a Jan. 28 Rand study published in Jama Health Forum found.
Seventy percent of practices follow a volume-based compensation plan, according to the analysis. For more than 80 percent of primary care physicians and more than 90 percent of physician specialists, volume-based compensation is the most common.
Although many health systems have financial incentives for quality and cost, only 9 percent of primary care providers and 5 percent of specialists have compensation based on those criteria.
“Despite growth in value-based programs and the need to improve value in healthcare, physician compensation arrangements in health systems do not currently emphasize value,” Rachel Reid, the study’s lead author and a physician policy researcher at Rand, a nonprofit research organization, said in a news release emailed to Becker’s. “The payment systems that are most often in place are designed to maximize health system revenue by incentivizing providers within the system to deliver more services.”
The study looked at physician payment structures for 31 physician organizations affiliated with 22 health systems across four states. The researchers interviewed leaders, examined compensation documents and surveyed physician practices.
The California Assembly is poised to vote on a bill Jan. 31 that aims to create a single-payer healthcare system in the state — the bill’s first major battle since a funding proposal for the program was introduced Jan. 6 — according to KTVU FOX 2.
The state’s plan to create a universal healthcare system involves two bills — AB 1400 and ACA 11 — that would implement and subsequently fund the program, dubbed CalCare. The Assembly is expected to only vote on AB 1400 on Jan. 31.
The Assembly must pass the bill Jan. 31 if it hopes to pass the single-payer framework bill by the end of the year. If the bill passes in the Assembly, it would then need approval in the Senate and from voters.
The plan is being met with public pressure that believesthe system would “create a new and exorbitantly expensive government bureaucracy.” Lawmaker opposition also largely focuses on the bill’s cost, which would be between $314 billion and $391 billion annually, according to KTVU. The bill’s funding counterpart, ACA 11, proposes to pay for it with a tax increase on businesses and high-earning individuals.
However, proponents argue that CalCare would cost less than the state’s current system, which equates to $517 billion when considering both taxes and household spending.
The Food and Drug Administration fully approved Moderna’s mRNA COVID-19 vaccine on Monday, saying it meets its safety and manufacturing requirements.
Why it matters: Moderna’s vaccine, which will now be marketed as Spikevax, is the second coronavirus vaccine to receive full approval after the FDA approved Pfizer-BioNTech’s vaccine in August.
Hundreds of millions of doses of Moderna’s vaccine have already been administered in the U.S. under the FDA’s emergency use authorization.
What they’re saying: “The public can be assured that Spikevax meets the FDA’s high standards for safety, effectiveness and manufacturing quality required of any vaccine approved for use in the United States,” acting FDA Commissioner Janet Woodcock said in a statement.
“The totality of real-world data and the full [Biologics License Application] for Spikevax in the United States reaffirms the importance of vaccination against this virus,” Moderna CEO Stéphane Bancel said.
The big picture: The rise of the Omicron variant forced vaccine makers to reevaluate the effectiveness of their vaccines, which were developed based on eaarlier forms of the virus.
Studies show that Moderna and Pfizer-BioNTech’s vaccines still overwhelmingly prevent severe disease and hospitalizations, especially when the first two doses are reinforced with a booster shot.
HENRY KOTULA 