Economy Unexpectedly Added 2.5 Million Jobs in May

(CN) — After shedding more than 20 million jobs in April, the U.S. economy added back 2.5 million last month as the unemployment rate dipped to 13.3%.

Friday’s jobs report from the Labor Department suggests the worst of the coronavirus pandemic’s impact on the economy could be over – at least for now. The unexpected gains defied most economists’ predictions of more massive losses in May.

Elise Gould, senior economist at the nonprofit think tank Economic Policy Institute, said the upswing was likely due to most states lifting stay-at-home orders.

“While these are welcome gains (as long as the health consequences aren’t offsetting), jobs losses since February still total 19.6 million, and are currently 13% below its February level,” she wrote. (Parentheses in original.)  

She cautioned that the “economic pain will be long-standing” without further relief to workers, families and state and local governments.

“Even with the mild improvement in May, the unemployment rate of all groups is still higher than the highest level the overall unemployment rate hit at the height of the Great Recession, when it reached 10.0% in 2009,” Gould said.  

Nick Bunker, economic research director at Indeed Hiring Lab, said it will take many more months of strong job growth to get the economy back to a healthy place.

“The bounceback started earlier than most expected, but don’t get too excited about this one month of data,” he said. “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. Furthermore, the labor market is still in a terrible spot with employment only 87% of where it was before the coronavirus crisis began.”

Most of the job gains were seen in industries that have been slowly reopening amid the Covid-19 pandemic.

Leisure and hospitality, which includes restaurants and bars, gained 1.2 million jobs last month after losing 7.5 million in April and 743,000 in March, when states began issuing lockdown orders to slow the spread of the virus.

The retail sector added 368,000 positions in May, compared to a loss of 2.3 million the month before, while the construction industry added 464,000 jobs last month and education and health services added 424,000.

Gains were also seen in manufacturing (225,000), professional and business services (127,00) and financial activities (33,000), which includes the real estate and rental industries as well as credit services.

Government jobs continued to decline, however, with 487,000 jobs lost in local government, 84,000 at the state level and 14,000 in federal government. The state government losses included 63,000 in education.

Michael Pearce, senior U.S. economist at Capital Economics, said the unexpected rise in jobs shows that rehiring began sooner than recent unemployment numbers suggest.

“With more states moving to loosen their lockdowns in the coming weeks, particularly in the populous Northeast, employment looks set to continue rebounding in June and beyond, although we still think it will be a long time before the labor market is anywhere near back to its pre-virus state,” Pearce said.

April’s job losses were revised from 20.5 million to 20.7 million, while the numbers for March were also revised to 1.4 million jobs lost, double the originally reported 701,000.

President Donald Trump raised eyebrows with off-the-cuff remarks as he touted Friday’s better-than-expected jobs numbers, saying the unarmed black man killed last week in Minneapolis would be proud.

“Hopefully George is looking down right now and saying this is a great thing that is happening for our country,” Trump said, referring to the Memorial Day police killing of George Floyd, whose death has sparked days of civil unrest in every state and several other countries.

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