The job market unexpectedly reversed its free fall in May as employers brought back millions of workers after pandemic-induced layoffs and the unemployment rate declined.
Tens of millions remain out of work, and the unemployment rate, which fell to 13.3 % from 14.7 % in April, remains higher than in any previous postwar recession.
But employers added 2.5 million jobs in May, the Labour Department said Friday, defying economists’ expectations of further losses and offering hope that the rebound from the pandemic-induced economic crisis could be faster than forecast.
Still, job openings remain far below normal, and the trillions of dollars in government assistance that have helped keep the economy on life support may be nearing their end.
The report noted that “employment rose sharply in leisure and hospitality, construction, education and health services, and retail trade,” even as jobs in the government continued their decline.
“What this is telling us is that at least part of the pain in April was due to people being laid off or furloughed who still had very strong connections to their employers,” Ernie Tedeschi, an economist at Evercore ISI in Washington said. “As good and surprising as this report was, this may just be the low-hanging fruit. These may have been the easiest workers to bring back.”
The rehiring bonanza at restaurants helped to lift payrolls
Restaurants and bars, health care employers and construction were among the sectors that drove the May job market improvement, based on the Labor Department’s report.
About 1.4 million people gained or took back their restaurant jobs, even as hotels continued to shed workers. About 460000 were hired or rehired in construction, 370000 in retail, and 390000 in health care and social assistance. That latter boost came heavily from dentist’s offices, which took back some 245000 workers.
The data tells the story of an employment rebound as the state and local economies began to reopen and Paycheck Protection Program checks went out, spurring rehiring and bringing workers back onto payrolls.
“The economy is still being very much buffered by stimulus,” said Michelle Meyer, head of U.S. economics at Bank of America. “When that starts to wane, we will learn a lot more about the underlying health of the recovery.”
Ms. Meyer noted that more than half of the job gains in May — 1.4 million — were in restaurants and bars, many of which probably received assistance under the government’s Paycheck Protection Program. Friday’s report suggests that the program, along with other elements of the government’s response, helped offset at least some of the economic damage.
Unemployment for black workers continued to rise
Unemployment for Hispanic workers and white workers dropped sharply in May, while the jobless rate for black adults remained high.
Joblessness for white adults fell to 12.4 % from 14.2 % the prior month, and Hispanic worker unemployment declined to 17.6 % from 18.9 % . For black workers, however, joblessness was up slightly to 16.8 %, and unemployment for Asians also increased, to 15 % from 14.5 %.
Construction and leisure and hospitality, sectors where Hispanic workers are heavily represented, rebounded sharply in May. Though it is too soon to tell with just one month of data, it could also reflect the beginning of a common recession pattern: job losses for black workers often continue even as the tide turns and white workers in particular begin to return to work.
Stocks surge as jobs report defies expectations
Stocks on Wall Street rallied on Friday, resuming a climb that has lifted the S&P 500 to within 10 % of its record high, after the U.S. government reported a surprising uptick in hiring in May.
The S&P 500 rose more than 2 percent in early trading, and shares in Europe were 1 % to 2 % higher.
Financial markets have been on an upward trajectory for weeks, as investors have responded to signs around the world that businesses were slowly but steadily returning to normal. In Europe, shares have been boosted by renewed efforts by policymakers to bolster the region’s economy.
Shares were already higher before the government reported an unexpected round of hiring in May, stock market futures shot sharply higher after the report, along with prices for crude oil, and yields on U.S. Treasury bonds, suggesting the jobs numbers delivered an unexpected jolt of economic optimism to investors.
“These numbers certainly are hard to comprehend,” wrote Chris Rupkey, chief financial economist for MUFG Union Bank. “But the good news is that the bottom of the labor market downturn has been hit.”