United States: Labor market unexpectedly posts gains in employment in May
Total non-farm payrolls surged 2.5 million in May, increasing at the sharpest rate since the series began in 1939, and baffled market analysts’ expectations of an 8.0 million decline. This follows April’s 20.7 million payroll cut—the starkest on record—driven by the Covid-19 pandemic and measures to contain the virus.
Employment in the leisure and hospitality, construction and retail sectors increased notably in May, as containment measures gradually eased.
The unemployment rate decreased to 13.3% in May from 14.7% in April, while the labor force participation rate ticked up from 60.2% in April to 60.8% in May.
Hourly earnings fell 1.0% month-on-month in May (April: +4.7% month-on-month), while annual wage growth decelerated from 8.0% in April to 6.7% in May.
Despite a positive reading in May, total non-farm payrolls are still down nearly 20 million since February. Going forward, the labor market should gradually improve as lockdown measures continue to ease, but our panelists expect the unemployment rate will remain elevated for the remainder of this year.
Commenting on May’s reading, James Knightly, an economist at ING, noted:
“There will naturally be some doubt lingering about these figures given they are telling such a different story to all other data on the labour market, but these are the official ones and on the face of it are fantastic. It suggests the American economy can bounce back very vigorously and we all need to massively revise up our economic projections.”