May 2020 Jobs Report

The May jobs report from the Labor Department surprised economists this morning – but this time, in a good way. Economists surveyed by the Wall Street Journal had expected a loss of 8.3 million jobs, which would have put the unemployment rate near 20%. Instead, the Labor Department’s establishment survey reported payrolls ROSE by 2.5 million jobs in May!

To put that figure into context, during the last economic expansion from March 2010 through February 2020, the average monthly gain in payrolls was only 190,000 – so this figure was 13 times higher than a normal reading. The highest number on record was a gain of 1.1 million in September 1983 – so this figure was still more than double that figure, though admittedly today’s news comes on the back of the worst monthly number on record. Additionally, instead of a rise in the unemployment rate, the household survey data showed a drop to 13.3% in May, from 14.7% in April. This compares to an unemployment rate of 3.5% in February.

How did this happen? First of all, the speed with which employers cut workers in March and April was dramatic. Once the US began the gradual reopening in May, the additional employees brought back into the workforce (however tepid it seemed) ended up dwarfing any additional industries who downsized their workforce in May.

The largest beneficiaries from the labor report were high school graduates with no college degree. From an industry perspective, the industries with the largest gains in employment were restaurants (+1.4 million, compared to the 6.1 million decline over the March-April time frame), and construction (+464,000, compared to April’s decline of 995,000).

Healthcare services also benefited with gains in dental offices (+245,000), physicians (+51,000) and other health practitioners (+73,000). Childcare services were +44,000, and private education jobs were +33,000. Retail trade employment rose by 368,000 (vs 2.3 million loss in April), with large gains in clothing and accessories stores, auto dealers, and general merchandise stores.

The bottom line is that the US economy is healing faster than many economists expected, which may serve to justify recent stock market optimism. While a full recovery is likely still a long way off, today’s report is a tribute to the flexibility and resiliency of US businesses.