The US unemployment rate has fallen significantly even as coronavirus ravages the economy, shocking economists who were expecting it to surge.
The unemployment rate dropped to 13.3 per cent – still extremely high by historical standards – in May from 14.7 per cent in April. This confounded analysts who had predicted it would surge to 19.8 per cent.
It came as the US economy added 2.5m jobs in May, even as it continued to be battered by coronavirus, according to the nonfarm payroll figures from the US Bureau of Labor Statistics (BLS).
“These improvements in the labour market reflected a limited resumption of economic activity that had been curtailed in March and April due to the coronavirus pandemic and efforts to contain it,” the BLS said.
The figures shocked economists and traders, who were expecting the jobs market to plunge further in May after a dire April. They are likely to lead to a re-appraisal of the US economy’s prospects.
It showed that the moves by states to reopen their economies in May stirred economies significantly. Employment rose sharply in leisure and hospitality, construction, education and health services, and retail trade.
However, the data must be appreciated in context. The unemployment rate has rocketed by 9.8 percentage points since February.
Analysts react to jump in US employment
US President Donald Trump reacted with glee, having long campaigned on the basis of a strong economy. He tweeted: “Really Big Jobs Report. Great going President Trump (kidding but true)!”
Mohamed El-Erian, chief economic adviser at Allianz, said the figures were a “huge upside surprise”. He called them a “head-scratcher”, reflecting the shock of many analysts.
Naeem Aslam, chief market analyst at trading platform Avatrade, said: “This is a mind-blowing number and shows that the economy is improving. Things are not as bad as many thought.”
However, a sharp rebound from coronavirus is far from assured. Unemployment remained at its highest level since the Great Depression in May.
Michael Pearce, senior US economist at Capital Economics, said he does expect a continued surge in hiring in the coming months.
Yet he added: “The need for continued physical distancing well into the future suggests there will still be lingering damage in some industries.”