On Thursday, Wall Street economists put out their predictions for May’s employment report, which the Department of Labor released on Friday morning. In April, as the coronavirus shutdowns led to mass layoffs and furloughs, over-all payrolls fell by 20.6 million. The consensus among the economists was that the May jobs figure would be down another eight million or so, and that the unemployment rate, which jumped to 14.7 per cent in April, would reach about twenty per cent—its highest level since the Great Depression.
The forecasts turned out to be way off the mark. The jobs report showed payrolls increasing by 2.5 million last month, and the unemployment rate declining to 13.3 per cent. That jobless figure is still well above the peak rate seen during the last recession. But the positive jobs number indicates that hiring is rebounding more rapidly than virtually anybody expected. John Authors, a columnist for Bloomberg, said it was “the single most surprising economic figure ever,” and he may be right.
In retrospect, we perhaps shouldn’t have been so shocked. Outside of the Northeast, many states started reopening their economies in late April and early May, which was earlier than most economists had predicted, and a lot of businesses called their furloughed employees back to work. The jobs report is based on two government surveys, one of employers and the other of workers. Both of them showed big gains in the number of people employed. The figure of 2.5 million came from the survey of employers. The survey of households showed an even bigger gain: 3.8 million.
The report also showed that the job gains were distributed throughout the economy. The number of people working in construction rose by 464,000, and the number working in manufacturing rose by 225,000. In the vast services sector, retail payrolls increased by 368,000, with clothing stores and auto dealers making substantial contributions. The health industry also saw a big rebound, as dentists and doctors’ offices reopened. But the biggest employment gains of all were recorded in restaurants and “drinking places,” where the number of people employed rose by close to 1.4 million.
All of this is consistent with many states flicking the “on” switch at the start of last month, and businesses responding. As other states, like New York and Massachusetts, relax some of their restrictions this month, there will be further gains in employment. That may explain why investors continued to bid up stock prices on Wall Street, where the Dow Jones Industrial Average rose by more than eight hundred points on Friday. Remarkably, the major stock averages are now down only a few percentage points relative to the all-time peaks they hit in February.
But one positive employment report doesn’t mean that the coronavirus recession is over, or that things will soon be back to normal. A jobless rate of close to fourteen per cent is alarmingly high, and the Bureau of Labor Statistics suggested that the actual rate is probably 16.4 per cent, because of a misclassification of people who aren’t working but are nevertheless counted as employed. Even going by the raw figures, almost twenty-one million Americans are still out of work, and another ten million are working part time because they can’t find full-time jobs. In the past couple of months, many major corporations, such as Boeing and Hertz, have announced large-scale permanent layoffs, and many smaller firms have gone out of business, laying off all their employees. Many of these jobs may never return. And some of the workers whom restaurants and stores have called back to work could end up getting laid off again if business doesn’t return to the levels seen prior to the pandemic. “It will take a couple of months to know how much wreckage there is in the economy,” Jason Furman, a former head of the Council of Economic Advisers, said on CNBC. “This is the easy part.”
Looking ahead, a big danger is that the jobs report could strengthen the hand of Republicans who are arguing against further economic-support packages. “There’s no reason to have a major spending bill,” Stephen Moore, a conservative economic commentator who is close to the White House, said on Friday morning. “The sense of urgent crisis is very greatly dissipated by the report.” In at least two ways, that is a mistaken argument. With so many Americans still out of work, there is an urgent need for Congress to extend the higher unemployment benefits it introduced as part of the CARES Act. State and local governments also need more financial support as they grapple with the virus and its impact on their budgets. The jobs report showed they reduced their payrolls by nearly six hundred thousand last month. Without federal aid, there will be many more layoffs of government workers in the months ahead.
And, of course, there is the question of how the virus-infection rate will evolve as states continue to reopen their economies. So far, there hasn’t been a big second wave, but, earlier this week, Florida, which was one of the first states to relax its restrictions, reported the largest daily increase in cases that it has seen. That may be in part because of an increase in testing, but it is hardly an encouraging sign. According to a tally by the Times, the number of new cases is rising in nineteen states. Even after an encouraging jobs report, the economy remains hostage to the pandemic.
