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A now hiring sign at a restaurant in Arlington, Va., on Aug. 4, 2020.OLIVIER DOULIERY/AFP/Getty Images

U.S. private payrolls unexpectedly fell in January as a resurgence in COVID-19 infections disrupted business activity, the ADP National Employment Report showed on Wednesday.

Private payrolls dropped by 301,000 jobs last month, the ADP report said. Data for December was revised lower to show 776,000 jobs added instead of the initially reported 807,000. Economists polled by Reuters had forecast private payrolls would increase by 207,000 jobs.

“The labour market recovery took a step back at the start of 2022 due to the effect of the Omicron variant and its significant, though likely temporary, impact to job growth,” Nela Richardson, chief economist at ADP, said in the report.

The ADP report is jointly developed with Moody’s Analytics and was published ahead of the Labor Department’s more comprehensive and closely watched employment report for January on Friday. It has, however, a poor record predicting the private payrolls count in the department’s Bureau of Labor Statistics employment report because of methodology differences.

Economists are expecting nonfarm payrolls increased moderately or even dropped in January after coronavirus infections, driven by the Omicron variant, slammed the nation.

According to the Census Bureau’s Household Pulse Survey published in mid-January, 8.8 million people reported not being at work because of coronavirus-related reasons between Dec. 29 and Jan. 10.

People who are out sick or in quarantine and do not get paid during the payrolls survey period are counted as unemployed in the BLS’ survey of establishments even if they still have a job with their companies, unlike in the ADP report.

According to a Reuters survey of economists, nonfarm payrolls likely increased by 150,000 jobs in January. The economy created 199,000 jobs in December, the fewest in a year.

The White House has been frantically trying to prepare the nation for a disappointing number, with several officials offering a preview of the report.

“I think the key point, from our perspective, is the underlying strength of the economy,” Jared Bernstein, a member of the White House Council of Economic Advisers told CNN this week. “The underlying strength of the job market is ongoing because, as we have seen, the caseloads are turning over.”

The United States is reporting an average of 461,097 new coronavirus infections a day, sharply down from the more than 700,000 in mid-January, according to a Reuters analysis of official data.

Demand for labour is strong, with fewer workers available. There were 10.9 million job openings at the end of December.

First-time applications for unemployment benefits have retreated from a three-month high as the Omicron wave subsides.

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