US unemployment dropped unexpectedly in May to 13.3 per cent as reopened businesses began recalling millions of workers faster than economists had predicted, triggering a rally on Friday on
Wall Street and giving President Donald Trump something to boast about amid his reelection bid.
The jobless rate is still on par with what the nation witnessed during the Great Depression. And for the second straight month, the Labor Department acknowledged making errors in counting the unemployed during the coronavirus outbreak, saying the real figure is even worse than the numbers indicate.
Still, after weeks of dire predictions by economists that unemployment in May could hit 20% or more, the news that the economy added a surprising 2.5 million jobs last month was seen as evidence that the collapse may have bottomed out in April at 14.7% and that a recovery is well underway as states loosen their lockdowns and let stores, restaurants, gyms and other businesses reopen.
“We are witnessing the easiest phase of growth as people come off temporary layoffs and come back to their employers,” said Harvard University economist Jason Furman, who led the White House Council of Economic Advisers during the Obama presidency. “And once employers are done recalling people, the much harder, longer work of recovery will have to proceed.”
Most economists had expected rehiring to
kick in as shutdowns were increasingly lifted and people gradually resumed shopping and eating out.
“The surprising thing here is the timing and that it happened as quickly as it did,” said Adam Kamins, senior regional economist at Moody’s Analytics.
On Wall Street, the S&P 500 was up 2.6% around midday on the news.
An exultant Trump seized on the report as evidence that the economy is going to come back from the coronavirus crisis like a “rocket ship.”
“This shows that what we’ve been doing is right,” said the president, who has pushed governors aggressively to reopen their economies amid warnings from public health officials that the country is risking a second wave of infections on top of the one that has killed over 100,000 Americans.
Still, the job market is in such a deep hole that it could take years to dig out, economists say. Most are forecasting unemployment in the high single-digits or low double-digits by the end of this year.
Economists had expected the government to report that employers shed 8.5 million more jobs in May on top of the 21.4 million lost in March and April.
Instead, nearly all industries added jobs, a sharp reversal from April, when almost all cut them. Hotels and restaurants added 1.2 million jobs in May, after shedding 7.5 million. Retailers gained 368,000, after losing nearly 2.3 million in the previous month.