2.5 Million Jobs Gained in May, Unemployment Rate Drops to 13 Percent

May shows largest monthly jobs increase ever as economy starts to recover from COVID-19

Roy Maurer By Roy Maurer June 5, 2020
LIKE SAVE
workers in kitchen

The U.S. economy surprisingly gained 2.5 million jobs in May, and the unemployment rate fell by 1.4 percentage points to 13.3 percent, according to the latest report from the Bureau of Labor Statistics. Economists were forecasting about 8 million jobs lost, and the unemployment rate rising to nearly 20 percent.

The May gain was by far the biggest one-month jobs surge in U.S. recorded history, and unemployment has seemingly hit its peak as employers across the country begin reopening and rehiring laid off workers. However, full economic recovery is expected to be slow, and very much depends on whether there is a resurgence of the virus later this year.

"The jobs numbers show a glimpse of light among the darkness of the past weeks and months," said ManpowerGroup North America President Becky Frankiewicz. "In the last week, our data has shown a 10 percent increase in available jobs in the U.S. Employers are hiring for essential roles and tech skills and we see open states are hiring most."

The labor market's "first green shoots of recovery" is a complete reversal from expectations, said Daniel Zhao, senior economist at Glassdoor. "The surprisingly good news may be attributed to states reopening in April and early May with businesses rehiring workers again."

Nick Bunker, an economist with the Indeed Hiring Lab, said that the rise in employment seems to be driven by the partial reopening of the economy. "Sectors hit hardest by the coronavirus are the ones seeing the largest bounce back in employment," he said. "Leisure and hospitality alone was responsible for about half of the increase in jobs. But employment in these industries are still far below pre-virus levels."

Employment increased in leisure and hospitality by 1.2 million, following losses of 7.5 million in April and 743,000 in March. Over the month, employment in restaurants and bars rose by 1.4 million as states began to relax social distancing measures. In contrast, employment in hotels and motels fell in May by 148,000 and has declined by over 1 million since February.

Construction employment increased by 464,000 jobs in May, gaining back almost half of

April's decline. "The huge decline in construction employment in April was largely driven by states like Michigan and Pennsylvania that shut down construction but reopened it in the first week of May," said Julia Pollak, a labor economist at online employment marketplace ZipRecruiter.

Health care employment increased by 312,000 over the month, with gains in dentists' and physicians' offices, while job losses continued in nursing and residential care facilities and hospitals. Manufacturing employment rose by 225,000, after falling by 1.3 million in April.

Retailers added 368,000 jobs, after a loss of 2.3 million in April. Pollack said that as a result of the service sector adding the majority of new jobs, "the female labor force, which shrank the most in April, grew by 1.3 percent, and the male labor force by only 0.9 percent."

She added that job losses continued in the public sector and in the information industry, which both predominantly employ white-collar workers. "Many more government layoffs can be expected in the months ahead unless there is some solution to the state and local budget crisis," she said.

Zhao pointed to the number of workers reporting being on temporary layoff declining by 2.7 million as the key to the unexpected payroll gains. "The decline in workers on temporary layoff clearly indicates that the resumption of normal economic activity [workers returning to their previous jobs] is a key driver for this surprise improvement in the labor market."

Remarkably, over 15 million people still report being temporarily laid off.

Performance vs. Expectations

Economists agreed that the apparent bounce back last month shouldn't veil the labor market for what it is—devasted by COVID-19.

"The employment situation remains dire, with 19.6 million fewer employed than last year and 30 million Americans on unemployment benefits," Pollak said. "The unemployment rate fell for whites and Hispanics but remained pretty steady for blacks between April and May. In the meantime, job openings have fallen by 48 percent according to ZipRecruiter data. Relative scarcity and bargaining power are quickly shifting from job seekers and workers to employers."

Zhao added that unemployment is at its highest level since the Great Depression and "there is still a long way to go until the labor market returns to pre-crisis levels and makes up for lost growth."

Josh Wright, chief economist at Wrightside Advisors, an economic research and consulting firm based in New York City, said that May job gains reflect only a partial retracement, and "most obviously, employment remains more than 10 percent below its February level. A large increase like this could theoretically be the beginning of a V-shaped recovery after all, but the recovery could quickly flatten out—especially if Congress doesn't renew the [Paycheck Protection Program] or provide other support. The situation of state and local government is particularly dire. Unlike the restaurants and retail stores that saw quick bounce backs, these local authorities may not be rehiring so quickly in the months ahead as tax revenues decline and expenditures on public health and economic assistance rise."

Wright also pointed out that involuntary part-time employment remained nearly double its level in March, and the underemployment rate remains high.

LIKE SAVE

Job Finder

Find an HR Job Near You
Search Jobs

Be humble, be teachable, and always keep learning.

The world of work has changed forever. It has never been more vital for you to grow your expertise and drive organizational change.

The world of work has changed forever. It has never been more vital for you to grow your expertise and drive organizational change.

Find Your Fit. Dive In.

SPONSOR OFFERS

HR Daily Newsletter

News, trends and analysis, as well as breaking news alerts, to help HR professionals do their jobs better each business day.