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The employment report that for the month of May was issued by the U.S Bureau of Labor Statistics on June 5th and it took everyone by surprise. A loss of 7 to 8 million jobs were expected after the decline of 20 million payroll jobs in April. Instead, the unemployment rate which was 14.7% in April had declined to 13.3%. The report also indicated that non-farm employment has increased by 2.5 million.
While employment gains occurred throughout all economic sectors, food and drink services showed in increase of 1.4 million jobs in May, accounting for almost half of the increased non-farm payrolls.
Retail trade jobs that showed a decline of 2.3 million in April rose by 368,000. The construction industry gained 464,000 jobs in May, enabling the industry to gain almost half of the jobs that were reportedly lost in April.
By the end of March, Initial Jobless Claims reached a record high of 6.8 million, and the report in May shows that the claims have reduced to 1.9 million – still a historically high value. Continuing Initial Jobless Claims reached its peak value in the second week of May and they are currently down by 3.5 million from the peak in mid-May.
These improvements in the labor market reflects gradual resumption of economic activity in many states. The damage to economic activities, from the nationwide lockdown to contain the coronavirus (Covid-19), may not be as severe or as lasting as many had expected.
The stunning increase in jobs in May is the biggest one-month surge of employment in U.S. history since 1939.
The government focused on support for individuals that lost their jobs as 70% of the GDP is from consumer spending. Reflecting the efforts of the government and government payments, personal income increased to 10.6% in April. There was a 13.6% decline in personal expenditure and the savings rate has increased to a record level of 330%.
This indicates that consumers are more likely to follow conservative spending habits unless they are certain that there will be re-employment from the jobs that they have lost.
The economy may have started to improve but it is important that we are aware of how far the labor markets have fallen. Payrolls have reached a low that was last seen at the end of 2011. This suggests that it may take several years for the labor market to rise back up to the levels of employment experienced in February.