- The Bureau of Labour Statistics on Friday said US employers added 2.5 million payrolls in May, a shocking figure that defied economists’ expectations of 7.5 million jobs lost.
- The US unemployment rate declined to 13.3% in May, bucking forecasts of a near-record 19% reading.
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Economists were shocked on Friday as the Bureau of Labour Statistics said US employers added 2.5 million payrolls in May, defying expectations of 7.5 million jobs lost. The surprise increase came on the heels of the record 20.5 million jobs lost in April.
The unemployment rate declined to 13.3%, bucking forecasts of a near-record 19% rate. April’s 14.7% reading was the highest since the Great Depression of the 1930s.
The May report suggested that the US economy might be past the peak of the coronavirus pandemic’s devastation. By the end of the month, all 50 states had relaxed at least some restrictions, even as the US’s COVID-19 death toll surpassed 100,000 people.
“Today’s data suggests that the US economy is more resilient than expected,” said Seema Shah, the chief strategist at Principal Global Investors. “Certainly the initial signs suggest that the reopening of economies has already started to heal the labour market.”
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The report is “rather startling,” said Ian Shepherdson, the chief economist at Pantheon Macroeconomics. “The biggest payroll surprise in history, by a gigantic margin, likely is due to a wave of hidden rehiring.”
Details by sector
Many sectors posted job gains in May after steep losses in April. Employment and hospitality added 1.2 million jobs after losing 7.5 million jobs in April, with employment in food services and drinking places making up most of the gains.
Education and health services, retail trade, and other services industries also added jobs in May after losing jobs in April. Still, government, information, and transportation saw another month of job losses.
The number of unemployed people on temporary layoff decreased to 15.3 million in May from 16.2 million in April. The Friday report noted that the number of permanent job losers increased to 2.3 million, a nearly 300,000 jump from April.
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“We experienced rock bottom about five or six weeks ago,” Amy Glaser, a senior vice president at the staffing agency Adecco USA, told Business Insider. She said the firm saw a steady uptick in May and an explosion of job-order activity, applications, and hires from clients over the past week.
Job listings as an indicator
Job postings on Indeed also improved slightly in the last weeks of the month but remained worse on the year.
“We have seen a pickup in the pace of job postings over the past four weeks now,” Nick Bunker, an economist at Indeed, told Business Insider. “But the trend and job postings is still far below what we were seeing at this point last year; it’s still down by 34%.”
The uptick in hiring in the early weeks of the month may be due partly to new practices that may have lasting implications for the labour market. Seniors Helping Seniors, a company that matches caregivers with elderly people, has had to shift to hiring online.
“It’s not something that we ever envisioned ourselves doing two months ago,” Daniel Jan, the company’s vice president of operations, told Business Insider. But going online has made hiring faster – necessary as demand for the service has spiked. The company said website traffic was up 14% from the previous quarter.
While this early bounce-back is a good thing, it’s still one month of data.
“Job growth rising by 2.5 million and the unemployment rate dropping by over a percentage point are positive developments, but it’s not clear how enduring this will be,” Bunker said.
He continued: “Furthermore, the labour market is still in a terrible spot, with employment only 87% of where it was before the coronavirus crisis began.”
Will the trend continue?
Economists will be watching for signs that the May report is part of a trend. Even though states are reopening, uncertainty remains.
Sarah May, a bartender in White Lake, Michigan, is worried about returning to work, as bars and restaurants in the state are allowed to reopen at half capacity on Monday.
May, who was laid off when the state shut down in March, finally started receiving unemployment benefits in April after initially being denied because her wages without tips were short of qualifying.
“I don’t want to go back to work at 50% and make less money,” May, who is the primary caretaker for her daughter with disabilities, told Business Insider. “I don’t want to risk the people that I care about.”
That uncertainty could still flow through to consumer spending, which makes up roughly 70% of US gross domestic product. In addition, while personal savings were boosted by government social benefits, consumer spending plummeted in April.
The additional $US600 added to weekly unemployment benefits under the Cares Act is set to end in July, which could further affect how people spend.
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