The US labour market improved unexpectedly in May, raising hopes that the economic damage associated with the pandemic will be less than feared.
The unemployment rate fell to 13.3% from 14.7% in April as companies began to hire again. Companies in the food, construction and healthcare sectors hired staff. In total, employers created 2.5 million new jobs, with education and retail also hiring.
This happened when the U.S. states began to withdraw some of the tough measures to curb the spread of the coronavirus.
As companies reopened, they began to rehire their employees. The job gains surprised economists, many of whom had warned the country that the unemployment rate could rise above 20% to a post-World War II peak.
Economist Justin Wolfers, a professor at the University of Michigan, tweeted: “It’s hard to escape the conclusion that the economy hit bottom in early/mid-May,” he said. “We are in a massive and deep hole and it will take a while to come out, but at least the hole is not getting any deeper.
President Donald Trump, who wants to keep up the pace of economic recovery, immediately went to Twitter to celebrate the numbers and claim credit.
“Really Big Jobs report. President Trump (joking but true),” he wrote.
The worst is behind.
The profits are just a small step to offset the more than 21 million jobs that US employers cut in March and April as many companies were forced to close their doors due to plant closures. In April, the unemployment rate reached 14.7%, the highest level since the Great Depression of the 1930s.
However, Labour Secretary Eugene Scalia said the report showed that the economic reopening was more robust than expected. “It seems that the worst effects of the coronavirus on the nation’s labour markets are behind us,” he said.
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The news spurred investors and caused the Dow Jones Industrial Average and the S&P 500 to rise by more than 2%, continuing the rally in equity prices from their March lows.
Job gains were not limited to the US. In Canada, employers added 290,000 jobs – far more than expected. However, the unemployment rate shot up to 13.7% – the highest level recorded in 1976 data.
‘Slight part of the recovery’?
As recently as February, the US unemployment rate hovered at a 50-year low of 3.5%.
On Friday, economists warned that the path of economic recovery remains uncertain. They pointed out that the hiring took place in May, when the government released billions of dollars in emergency aid to businesses to cover workers’ wages and encouraged recipients to recall employees.
Hiring in restaurants and bars accounted for about half of the jobs created last month. Dental practices accounted for another 10%.
Many of the gains also came from people who had told surveyors that their layoffs were temporary. “This means that this was the easy part of the recovery,” said economist Jason Furman, a senior economic adviser to President Barack Obama.
The losses hit minority and low-wage workers hardest, a trend that continued in May. The unemployment rate for white workers fell to 12.4% from 14.2% in April. Unemployment among Hispanic workers also fell from 18.9% to 17.6%. However, the unemployment rate of black workers increased from 16.7% to 16.8%.