May job figures just as shocking as April, but in a positive direction

May Job Figures

Jeoff Hall, Managing Economist, Refinitiv, while discussing May jobs figures, comments:

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Stunning May Jobs Figures

“We are almost as stunned by the May jobs figures as we were by the prior month’s figures. The economy added back 2.5 mn jobs in May , more than 12% of the 20.6 million jobs lost in April. Even the most optimistic forecasts called for payrolls to have shrank another 8%. The reversal was even more striking in the private sector, where payrolls rebounded by  3.1 mn, recapturing more than 15% of the 19.724 mn jobs lost in April. Or take a look at the household survey, which showed total employment rose by 3.8 mn.

One can’t subtract much from the entire employment situation report for May, though the number of permanent job losers continued to rise, increasing by 295,000 in May to 2.3 million. The number of unemployed persons who were jobless 5 to 14 weeks rose by 7.8 million to 14.8 million, accounting for about 70.8 percent of the unemployed. Labor force participation recovered 0.6-percentage point to 60.8%, if only after skidding 2.5 percentage points to a 49-year low in April.

Focusing on the positive, employment levels rose meaningfully in nearly every industry super sector. Among the minority that didn’t, Information lost 38k, Mining and Logging lost 20k jobs, while Transportation and Warehousing lost 19k jobs. All of the loss in the latter industry stemmed from a 50k drop in air transportation workers. Even though Retail Trade added 368k jobs, there were 95k fewer employed at electronics and appliance stores. Again, declines were  the exception, not the rule, and we can expect positive job growth in most industries in May.”

Policymakers Will Learn The Wrong Lesson From This

Theodore Littleton, Associate Economist, Refinitiv, adds:

“As always there are caveats, and they are large even if the report overall remains a positive stunner. The BLS once again said that the unemployment rate may have been lowered by misclassification, but that the numbers were not adjusted to compensate in order to maintain integrity of the data. Specifically, 5.4 mn were seen as not at work for ‘other reasons’, and the great majority of them likely should have been considered as unemployed on temporary layoff. If not for that, they estimate that the unemployment rate might have been 3.1 pp higher (16.4%). Last month they said that the same effect might have had a ‘truer’ unemployment rate at 19.5%.

There is a worry that policymakers will learn the wrong lesson from this. The much better than expected numbers were no doubt assisted in large part by government relief efforts, including the Paycheck Protection Program, which injected hundreds of billions of dollars into the economy. Unfortunately, we’ve already seen some signs that this month’s report has taken the wind out of the sails of those looking to continue the relief: A Washington Post reporter is quoting White House economic advisor Stephen Moore as saying, “It takes a lot of the wind out of the sales of any phase 4 – we don’t need it now. There’s no reason to have a major spending bill. The sense of urgent crisis is very greatly dissipated by the report.”

The Bottom Line: There is still much work to be done before claiming the labor market is healthy again. But, the work began a month earlier than expected and we think that means we may be out of double-digit unemployment rates in the third quarter, instead of the first quarter of next year.

May Job Figures

May Job Figures

Source: Refinitiv IFR

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