The job market halted its pandemic-induced collapse in May as employers brought back millions of workers and the unemployment rate unexpectedly declined.
Tens of millions are still out of work, and the unemployment rate, which fell to 13.3 percent from 14.7 percent in April, remains worse than in any previous postwar recession. The rate would have been higher had it not been for data-collection issues.
Nonetheless, after weeks of data depicting enormous economic destruction, Friday’s report from the Labor Department offered a glimmer of hope. Employers added 2.5 million jobs in May, defying economists’ expectations of further losses and holding the prospect that the rebound from the economic crisis could be faster than forecast.
Job growth was concentrated in industries hit hardest early in the crisis, like leisure, hospitality and retail work. But manufacturing, health care and professional services added jobs as well, possibly signaling that the damage did not spread as deeply into the economy as many feared.
Major stock indexes surged on the news, and President Trump hailed the report in remarks outside the White House, saying the rebound “leads us onto a long period of growth.”
“We will go back to having the greatest economy anywhere in the world, nothing close, and I think we’re going to have a very good upcoming few months,” Mr. Trump said.
All the same, economists warn that it will take far longer for the economy to climb out of the hole than it did to fall into it.
And even as the economy shows signs of revival, the United States is confirming more than 20,000 new coronavirus cases a day, with counts rising in particular in the South and the West.
While employers recalled temporarily laid-off or furloughed workers in May, the number of permanent job losses rose, a sign that some businesses didn’t survive the shutdown, or expect demand to stay depressed as the economy reopens. Others are bringing back workers at reduced hours: The number of people working part time because they couldn’t find full-time work barely budged. And millions more people have been laid off in the weeks since the data released Friday was collected in mid-May.
“The surprise to me in this report is that the recovery was earlier than we expected, but the next question is whether it will be faster than we expected,” said Daniel Zhao, senior economist at the career site Glassdoor. The increase in permanent job losses, he said, “is a concerning sign for the length of the recovery because every layoff that turns permanent makes a full recovery harder.”
Economists said the gains in May indicated that Congress and the Federal Reserve had at least partly succeeded in limiting permanent economic damage by providing trillions of dollars in assistance to households and businesses.
But that aid is now in jeopardy, and economists warned that there was no guarantee the job market would continue to improve without it.
“The economy is still being very much buffered by stimulus,” said Michelle Meyer, head of U.S. economics at Bank of America. “When that starts to wane, we will learn a lot more about the underlying health of the recovery.”
The Labor Department cautioned that data-collection issues troubling the agency throughout the crisis continued last month. Some temporarily jobless workers were characterized as employed in May; had they been counted correctly, the department said, the unemployment rate would have topped 16 percent.
The official unemployment rate also leaves out many people who are not actively looking for jobs or are working reduced hours. A broader measure of unemployment and underemployment, which includes those groups, was 21.2 percent in May, down from April but higher than any other month on record.
For some demographic groups, the crisis is deeper. Early job losses were concentrated among low-wage workers in service jobs, many of them black and Latino. The unemployment rate for black workers rose slightly, to 16.8 percent, although mostly because more people were looking for work. The jobless rate for Latinos fell but was still the highest of any racial or ethnic group, at 17.6 percent.
Even if they didn’t anticipate the May bounce, many economists had expected that unemployment would begin to ease as states reopened and businesses called employees back to work.
More than half of the month’s job gains — 1.4 million — were in restaurants and bars, many of which received assistance under the federal Paycheck Protection Program. Friday’s report suggests that the program, along with other elements of the government’s response, helped offset at least some of the economic damage caused by the shutdown, which should allow for a faster recovery.
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“If it is the case that more people were able to hold on to their jobs and remain attached to the labor force, then the recovery will be more efficient,” Ms. Meyer said. “People will have more income to spend, they will have more consistency as far as their employment, and confidence will be higher.”
At Beef ‘O’ Brady’s, a Florida-based chain of more than 150 sports bars, business was down 62 percent in April, when its dining rooms were closed nationwide and its only business came from takeout. But only a handful of the chain’s restaurants have closed permanently, in part because nearly all of its franchisees received Paycheck Protection Program loans.
“The damage would have been much greater without P.P.P., I can tell you that,” said Chris Elliott, the chief executive.
Now business has begun to pick up as states gradually allow restaurants to reopen. In the last week of May, sales were down about 15 percent, Mr. Elliott said, and customers appear eager to eat out again.
The longer-run outlook is uncertain. If business stays at its current level, many franchisees will struggle to eke out a profit, he said, and many locations are losing money. That won’t be sustainable.
“There are going to be franchise owners that if they can’t reach 15 percent, or it doesn’t improve incrementally over time, they’re going to get fatigued, and I think some of them are at risk of just throwing in the towel,” Mr. Elliott said.
At the same time, employment in nearly every sector remains far below where it was before the crisis. Many economists expect an initial resurgence in at least some kinds of business. But it isn’t clear how strong that upturn will be, or what will come after.
“It’s the jump and then the crawl, and the question is how high is the jump and then how long does the crawl take,” said Nick Bunker, who leads North American economic research at the Indeed Hiring Lab.
When Mike Lowe flew to Florida in early March to visit his mother, he had a successful freelance business doing web and graphic design, and a part-time gig in dog day care. A week later, he arrived home in Portland, Ore., to a text message from the dog business telling him not to go into work. He was let go entirely within days, even as his freelance clients began calling to cancel orders.
Two and a half months later, Oregon has begun to reopen, but Mr. Lowe, 51, is treading water. One freelance project looks likely to resume soon, but another client, a local bar, told him this week that it would shut down permanently — its business relied on live music, which seems unlikely to come back anytime soon. The owner of the dog day care says she hopes to bring him back at reduced hours but isn’t sure when business will rebound sufficiently to make that possible.
“I’d say I’m just in wait-and-see mode at the moment,” he said.
Percent change in jobs from previous month, by industry
The leisure and hospitality industry, which includes restaurants, had a severe loss in April but bounced back the most in May.
Like many laid-off workers, Mr. Lowe is able to get by largely because of the $600 a week in extra unemployment pay that Congress approved as part of its emergency funding bill in March. But that benefit is set to run out at the end of July, and it is far from clear that Congress will extend it. Economists warn that pulling away support too early could stall the recovery.
“Right now, the government is plugging a good deal of that hole for households, but how long will that last, we don’t know,” said Ellen Zentner, chief U.S. economist for Morgan Stanley. She noted that the unemployment rate will almost certainly remain elevated in August, adding, “It’s a very tough time to pull support away from households when the unemployment rate is still that high.”
Even now, as some businesses start to bring back workers, layoffs are continuing. Nearly two million workers filed first-time claims for state unemployment benefits last week, more than double the worst week of any previous recession. State and local governments cut nearly half a million jobs in May, and millions more such layoffs are likely in coming months in response to plunging tax revenues.
In Jackson, Mich., a small city about 70 miles west of Detroit, the school board voted last week to cut more than 40 positions in response to a multimillion-dollar budget shortfall. Jeff Beal, the district’s superintendent, said he worried about the impact the cuts would have on education and on the local economy. But he said the district had little choice.
Among the cuts: the assistant superintendent for human resources, which means Mr. Beal will have to inform laid-off workers himself.
“Now that that position has been eliminated, that responsibility falls to me,” he said. “I’m going to have to make a lot of very personal, very painful phone calls this week.”
Katie Rogers contributed reporting.