New applications for unemployment benefits fell last week for the third week in a row, reflecting a tight labor market that appears to have moved past the temporary disruptions caused by the Omicron variant of Covid-19.

       Initial jobless claims, a proxy for layoffs, fell to a seasonally adjusted 223,000 for the week ended Feb. 5, down from a revised 239,000 the week before, the Labor Department said Thursday. The four-week moving average, which smooths volatility, also fell.

       As the Omicron variant drove up Covid-19 cases last month, millions of workers called in sick and businesses temporarily shut down because of outbreaks. Jobless claims rose sharply but temporarily in mid-January while private-sector estimates showed that job openings began to ease that month.

       Still, U.S. employers hired at a robust pace in January, adding 467,000 jobs while facing the Omicron variant, the Labor Department said last week. Economists say that strong demand for workers is going to remain a hallmark of the U.S. labor market throughout 2022.

       Continuing claims, a proxy for the total number of people receiving unemployment benefits through regular state programs, remained the same for the week ended Jan. 29—holding below pre-pandemic levels. Continuing claims are reported with a one week lag.

       More recently, Covid-19 cases and hospitalizations have begun to fall and some states have already announced plans to unwind Covid-19 restrictions.

       “It seems like we’re putting Omicron in the rear view," said Stephen Juneau, senior U.S. economist at Bank of America. “Labor market conditions are still what they were prior to Omicron: Strong demand for labor and supply that is going to come back gradually."

       Wages rose in January from the year prior by 5.7%, nearly double the average of about 3% before the pandemic, which speaks to the efforts businesses have made to attract and retain workers, Mr. Juneau said.

       Dan Watkins, owner of All Four Seasons Garage and Entry Doors, an installation company based in the Atlanta area, said that he’s struggled to hire workers for his location in Nashville. Mr. Watkins said he’s prioritized retaining current staff by becoming more flexible and raising wages.

       “You’ve got to give them more flexibility as far as time off, leaving an hour early if they need it, or giving them more unpaid time off just to keep them working for you," he said.

       Mr. Watkins said that raising wages, in addition to supply-chain bottlenecks and the higher cost of freight, has forced him to pass down those costs onto his customers, who he is charging about 80% more than before the pandemic. He noted what he pays for doors has more than doubled.

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       “I would say the current prices have probably priced 15% of people out of the market," Mr. Watkins said.

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