Smashing expectations, U.S. employment rose by 2.5 million in May, the Department of Labor announced Friday, with the unemployment rate falling to 13.3%, down from 14.7% in April.
Forecasters had expected the report to show millions of job losses and an unemployment rate near 20%. Instead, it delivered the best one-month jobs number since at least 1939, while providing strong support for the view that the worst of the coronavirus recession is now behind us.
Although it’s hard to say just how large the effect is, economists say the surprisingly strong numbers are likely driven by the stimulus programs passed by Congress, especially the Paycheck Protection Program, which has incentivized small businesses – including many restaurants and bars, which gained 1.4 million jobs – to put employees back on the payroll. “The best interpretation I have for this right now is that when we had the April report, virtually none of the stimulus had gone out by the reference week,” economist Ernie Tedeschi of Evercore ISI told The News York Times. “Now we’ve had a full month of fiscal support. I think part of the recovery is due to that.”
Here’s a roundup of details and comments on the jobs report few experts saw coming:
The economy is reopening: “These improvements in the labor market reflected a limited resumption of economic activity that had been curtailed in March and April due to the coronavirus (COVID-19) pandemic and efforts to contain it,” the report said. “In May, employment rose sharply in leisure and hospitality, construction, education and health services, and retail trade.”
But some key sectors are still in bad shape: While the leisure and hospitality sector led the pack with a gain of 1.2 million jobs in May, after losing 7.5 million jobs in April, and health care made a big comeback with 321,000 jobs (led by dentists, who gained 244,000 jobs), other sectors are still contracting. Government payrolls, which include public school teachers, shrank by 585,000 in May as state and local governments continued to struggle with plunging tax revenues and increased social spending. And job losses continued in the air transport, transportation and warehousing, mining and logging, and information sectors.
Trump claims success: President Trump, who has pushed for an aggressive schedule to reopen the economy, took credit for the strong report. “Really Big Jobs Report. Great going President Trump (kidding but true)!” he wrote on Twitter. At a hastily arranged press conference Friday morning, Trump said, "We're bringing our jobs back. We're gonna be back there. I think we're actually going to be back there higher next year than ever before."
But the numbers may be understating the problem: There are still nearly 20 million people who are jobless, and employment is roughly 13% below its level in February, before the pandemic struck. Millions of workers on furlough were not included in the unemployment numbers; had they been counted, the unemployment rate would have been over 16%. Adding in workers who have given up and left the labor force, and the unemployment rate could be closer to 20%.
And the job gains were not evenly distributed in the population. While the unemployment rate for whites fell to 12.4%, down from 14.2% in April, the jobless rate for black workers rose slightly to 16.8%. The Asian unemployment rate also rose, from 14.5% to 15%.
The economy still has a long way to go: “While the labor market recovery started a month or two earlier than expected, therefore suggesting a V-shaped trajectory in the early stages of the recovery, it doesn't tell us about the ultimate shape of the recovery,” researchers at Bank of America said in a note. “We continue to remain concerned about the health of the economy after the initial jump higher from reopening. The path ahead is still likely to be bumpy given risks posed from the virus and many millions of displaced workers.”
Chris Rupkey, chief economist at Mitsubishi Financial Group, had a particularly pessimistic take on the road ahead, saying that “all the workers who lost their paychecks will find it difficult to regain their place in society as many of these jobs are gone forever. It took years for the economy to grow enough to find jobs for those unemployed in the last recession, and it will take years again this time to do the same.”