MANHATTAN (CN) — Fist-pumping its way back into a rally, Wall Street reacted gleefully after Friday’s jobs report showed the number of unemployed fell by millions last month.
After the Bureau of Labor Statistics released the surprising jobs numbers on Friday, the Dow Jones Industrial Average gained 700 points, a 2.67% increase. The S&P 500 and Nasdaq also increased, though not at the same rate.
Many economists — including those at several Federal Reserve banks across the nation — had predicted unemployment to hit 20% or even higher in May.
But the Bureau of Labor Statistics’ May jobs report surprisingly showed that nonfarm jobs actually rose by 2.5 million last month, with the unemployment rate falling to 13.3%. The uptick in jobs was due mostly to a sharp increase in several hard-hit sectors, including the leisure-hospitality and retail industries.
For instance, retail trade, which had lost 2.3 million jobs in April, gained back 368,000 of those jobs last month. The construction industry gained back nearly half its job losses from April, increasing by 464,000 jobs in May.
The health care industry also saw a stunning reversal in jobs, with 424,000 gained in May compared with 2.6 million lost the previous month. About half of those jobs in May were due to a spike in dental office employment, which accounted for 245,000 of the increase.
The only sector to continue to hemorrhage jobs was in government, which lost 585,000 jobs in May on top of the 963,000 jobs lost in April. Most of those lost jobs were in local government education positions.
In a rapid-fire series of tweets, President Trump took a victory lap over the report. “I am so stunned,” he wrote. “I’ve never seen numbers like this and I’ve been doing this for 30 years!”
The president will hold a press conference at 10 a.m. on the jobs report.
Experts were flabbergasted by the report. “As if life couldn’t confuse us even more,” wrote Peter Boockvar, chief investment officer at Bleakley Advisory Group in a Friday note. “Bottom line, all throughout May we saw states reopen in staggered ways and its now obvious that the economists couldn’t estimate that this would result in a net increase in jobs, likely because what was seen in the weekly claims data and the [manufacturing index] employment components.”
Boockvar noted May’s job report, like the one in April, does not include workers who had stopped looking for jobs or whose hours were pared back. That number still hovers at 21.2 million, compared with 22.8 million in April.
“This was a slam dunk,” wrote Sri Thiruvadanthai, director of research at the Jerome Levy Forecasting Center, in a tweet Friday morning. “The consensus was outright stupid. Cannot believe it. Practically every business that had to close due to shutdown had closed by mid-April. In mid-May, there could only be a bounce from that.”
The unemployment numbers are far less than what most economists expected. The Federal Reserve Bank of St. Louis had predicted in April that unemployment could hit as high as 32%, higher even than the Great Depression.
Last month, Neel Kashkari, chairman of the Federal Reserve Bank of Minneapolis, said that the BLS jobs reports likely understated how many jobs have been lost. While the April jobs report showed a 14.7% unemployment rate, Kashkari speculated that “the real number is probably around 23% or 24%.”
The Congressional Budget Office also had predicted the unemployment rate would hit 16% during the third quarter of 2020 before beginning to drop. The unemployment rate was supposed to hover around at least 14% during the second quarter, the CBO predicted earlier this year.
The positive jobs report follows other reports that indicate the economy is starting to heal itself.
On Thursday, the Labor Department reported 1.8 million new unemployment insurance claims filed during the week ending May 30, marking the ninth week of steady drops in new claims. The number of claims in the Pandemic Unemployment Assistance program also dropped, at 623,000 new claims filed last week, down from 1.3 million the week before.
Continuing claims increased by 650,000, however, bringing the total to 21.5 million total Americans unemployed last week. About 47 million claims have been filed since the pandemic struck in mid-March.
The Bureau of Economic Analysis also reported the trade deficit grew $7 billion in April, up from $42.3 billion in March, though investors largely ignored that report.
On Thursday, the American Bankruptcy Institute also reported a 48% increase in Chapter 11 filings last month, with 722 filings in May 2020 compared with 487 filings in May 2019. However, the total bankruptcy filings dropped 42% year over year, the institute found, with about 40,000 filings last month compared with about 69,000 total filings in May 2019.
Meanwhile, the number of cases of Covid-19 have continued to creep upwards. According to data compiled by Johns Hopkins University, the number of people infected worldwide with Covid-19 has grown to more than 6.6 million, while 391,000 have died. In the United States, 1.8 million are confirmed to have had Covid-19, while nearly 108,000 have died.
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