By Timothy Aeppel

(Reuters) – When Michael Tamasi got to his office Monday after the holiday shutdown, he found nine workers at his small factory were absent — either because they had COVID-19 or had been exposed and were trying to get tested.

That’s over 10% of his staff of 81, and by far the greatest single outage he’s seen since the start of the pandemic.

A contagious Omicron variant has triggered a new wave of health crises that have forced airlines to cancel, shut down stores and curtailed meat processing plant output. It also closed schools across the U.S. The surge is exacerbating an already tight labor market and forced government health officials to curb how long it says workers need to isolate once they’re infected.

According to the Labor Department’s Friday report, 199,000 American jobs were added last month. However, the unemployment rate fell to 3.9% in December from 4.2% in November. It is a sign of the limited supply of workers.

Inflation has increased as a result of the scramble for open positions and higher wages. The Friday report revealed another round of solid gains in pay, with the average hourly wage up 4.7% compared to a year earlier.

Manufacturers, who were forced to remain open during the pandemic have come up with creative ways to continue their production lines. Many claim they can handle this latest outbreak of the pandemic without making major production reductions.

“It’s definitely worse than it’s been,” said Tamasi, CEO of AccuRounds, a contract manufacturer of metal parts in Avon, Massachusetts. He claimed that overtime has helped keep production moving.

“We’re basically opening all hours so we can get the most we can with the people we have,” said Tamasi, who makes parts used in airplanes, robots, and medical devices, including machines that make vaccines.

It is possible that a larger wave of pandemic deaths could occur. Past surges were fuelled by family gatherings on holidays.

Jason Lippert, CEO of LCI Industries (NYSE:), the largest parts supplier to the recreational vehicle industry, said his company is seeing positive cases daily, ranging from “five on the low side to 20 on the high side.” It’s a nuisance, he said, but it’s manageable.

Lippert’s keeping a close watch, however, since the Omicron variant is just starting to hit harder in the region where he has most of his 100 plants – in and around Elkhart, Indiana.

Omicron has struck just as many businesses were getting their factories back up to speed after the initial pandemic disruptions. Jim Kirsh, president of Kirsh Foundry Inc, in Beaver Dam, Wisconsin, said he hasn’t seen a surge of absenteeism at his 110-person operation, although he just saw his first COVID case in six months.

According to him, he was able to get his factory near full employment only after increasing the starting wage by more than 50% in several steps since March 2020.

He’s passed along those costs to customers, though many objected. “Most asked for examples of our major cost drivers and when you show them that wages are up 57%, is up 100%, alloys are up 50% to 300%, there is not much they can say,” he wrote in an email.

Many companies have been forced to invest in new technology due to rising costs and tight labor markets. Kirsh will spend as much as $2 million on robotics this year to reduce the number of jobs by between 4 and 8.

Kirsh said he has little control over most of his costs—such as raw materials and transportation—so he’s focused on boosting how much each worker can produce. ‘The more expensive labor becomes, the less I use.”