The U.S. economy added 2.5 million jobs last month as states started to ease lockdown restrictions. The strong employment numbers shocked economists who had forecast nearly 8 million job losses in May.
The jobless rate dropped from 14.7 percent in April to 13.3 percent, well below the consensus estimate of nearly 20 percent. The significant upswing in employment suggests that the U.S. economy turned a corner much faster than expected.
Brett Ryan, senior U.S. economist at Deutsche Bank, said it would take several months to understand the underlying strength of the rebound.
“In our view, the unexpected bounce in employment may reflect rehiring ahead of planned reopenings within states that was not quite captured in the initial jobless claims data,” he said in a report.
“The May payroll figure was what we would have expected for June. It will take several more months of data (and revisions) to get a better sense of the underlying pace of the labor recovery.”
The coronavirus relief package may also have protected jobs, particularly the Paycheck Protection Program, which encourages companies to keep their employees on the payroll in return for forgivable loans.
Meanwhile, small business optimism is rebounding as states gradually lift their stay-at-home orders, according to the National Federation of Independent Business (NFIB). The optimism index tracked by the NFIB rose 3.5 points in May, reversing much of the decline in April.
Small businesses are eager to get back to work, planning to hire workers, and even planning to invest, according to the NFIB survey.
Joy Gendusa, founder and CEO of PostcardMania, based in Tampa Bay, Florida, said her business is open and performing much better than she expected.
The company implemented a hiring freeze in March, which was lifted last month.
“Since May 1, we have been hiring like crazy,” Gendusa told The Epoch Times, adding that she’s recruited 20 people since then.
Founded in 1998, PostcardMania provides marketing services to small business owners. In March, when the lockdowns began, the company’s weekly sales plummeted by an average of 58 percent. However, Gendusa didn’t lay anyone off and continued to spend about $100,000 a week on marketing. Her bold decision has paid off.
“We’re already back to a normal range in new leads and sales—even better, actually,” she said, adding that she has never been more hopeful about the future than she is today.
“We currently have 13 open positions to fill, three being replacements and the other 10 completely new jobs. We’re going full-steam ahead.”
In an interview with the Wall Street Journal at a virtual summit, White House economic adviser Kevin Hassett said he expects employers to add another 3.5 million to 4 million jobs in June.
There are already positive signs for the strength of the labor market recovery in the coming months. For example, a Washington Post-Ipsos poll conducted from April 27 through May 4 found that 77 percent of laid-off or furloughed workers expect to get their old jobs back once businesses reopen.
In addition, more than 78 percent of unemployed workers in May were on temporary layoff, which suggests that workers remain attached to their prior employers, according to a report by the White House Council of Economic Advisers (CEA).
A record surge in average weekly hours in May is another positive indicator, the report stated.
“Increasing hours can be a sign that employers need to hire more workers to meet this demand.”
Ken Rusk, founder and president of Ohio-based Rusk Industries, rehired more than 50 people after the lockdown restrictions were eased in his state.
“We were fortunate enough to remain open at about 65 percent of our staff of 150,” he told The Epoch Times.
The company rehired most workers who were laid off, with the exception of a few who chose to remain unemployed. They have been replaced by new hires.
Rusk said that, initially, 10 of the employees were afraid to return to work, but as time wore on, they grew more confident and followed other colleagues. In addition, a few former employees preferred to continue receiving generous unemployment benefits instead of returning to work.
Current unemployment benefits, which include an additional $600 weekly benefit, are making it harder for some employers to recall workers and fill open job positions.
Rusk said, however, that “most soon came back, knowing they were now exposed to potential claw-backs from the unemployment office.”
A blue-collar construction business entrepreneur, Rusk launched his company 30 years ago. He feels optimistic about the future of his business despite the “two very unfortunate occurrences—the pandemic, and now the riots.”
“The outlook for business is on an upward trend. We are now very busy. Should this continue, we will be looking for 20+ staff hires,” he said.
More than two-thirds of job gains in May came from leisure and hospitality (1.2 million) and construction sectors (464 thousand), according to the U.S. Bureau of Labor Statistics (BLS).
“The quick rebound in employment and sizable drop in May unemployment is encouraging,” Scott Anderson, chief economist at Bank of the West, owned by BNP Paribas, stated in a report.
“This should ease a bit of the drop in consumer spending in the second quarter, and sets the U.S. up for a better growth rebound in the third quarter.”
While May’s surprise jobs report suggests a faster road to economic recovery, Anderson believes “the U.S. labor market isn’t exactly healthy.”
“As of May, almost 21 million Americans remain officially unemployed, about 6 million more than during the Great Recession [of 2008] peak,” he wrote.
In addition, there’s an ongoing misclassification error of workers.
The U.S. Bureau of Labor Statistics warned that some workers who were “employed but not at work” due to the pandemic should be classified as temporarily unemployed.
If adjusted for this misclassification, the true U.S. unemployment rate would be 16.4 percent for May and 19.5 percent in April, Anderson said.