DIRE HEADLINES had already been prepared before the release of America’s May jobs report on June 5th. Most analysts expected payroll employment to have fallen last month by several million, on the heels of record declines in March and April, and the unemployment rate to have jumped to nearly 20%. Instead, the Bureau of Labour Statistics reported a sharp increase in employment, of 2.5m, and a drop in the jobless rate from 14.7%, a post-Depression record, to 13.3%. Although the American labour market remains deeply troubled, President Donald Trump nonetheless convened a hastily called press conference to hail the news and declare the country back on the road to better days. “This is better than a V[-shaped recovery],” he said. “This is a rocket ship!”
Those bleak expectations had been set by a flow of dreadful economic news. Americans continue to file new claims for unemployment benefits by the million. Indices of economic activity showed that production kept declining across the economy in May, although at a far slower pace than in April. Yet some high-frequency indicators—such as restaurant bookings and measures of personal travel—had indicated signs of revival. And investors have been bullish for weeks, pushing stock indices close to new highs. They greeted the jobs data by sending the S&P 500 up by 2.8%.
But the details of the report, though encouraging, do not suggest that a rapid return to normality is imminent. New hiring was concentrated in service industries, primarily in health, leisure and hospitality. But the number of new jobs in May amounted to just a fraction of the total lost since February; the leisure industry added about 1.2m last month, but shed more than 8m in March and April. Part of the rebound in hiring can probably be explained by the structure of a federal aid programme intended to support small and medium businesses, which provides emergency loans that will ultimately be forgiven if lay-offs are avoided. Some of it, too, can be explained by initial steps towards reopening, as firms that were temporarily shut restarted work at dramatically reduced capacity. But although the number of Americans on temporary furlough declined, permanent lay-offs rose by nearly 300,000, taking the total to 2.3m. Disconcertingly, given the protests against police violence wracking the country, the jobless rate for black Americans ticked upwards, to 16.8%, while that for whites fell.
Labour-market data are very likely to keep improving over the summer, as state and local governments continue to ease lockdowns. The critical question for the American economy, however, is how many job losses and firm closures will prove permanent. Joblessness will probably remain well above normal levels, and policy support for the unemployed will continue to be justified. There are signs, however, that this surprising gust of good news may be undercutting interest in more spending in Washington. Meanwhile, the risk of new economic disruption, by covid-19 or by civil unrest, remains. The jobs figures were indeed a pleasant surprise. But it will be months, or years, until American workers can exhale without fear.