The economy gained 2.5 million jobs in May, lowering the unemployment rate to 13.3%, the Labor Department said Friday.
The payroll gains, the largest on record, represented a stunning development and a hint that the worst-case scenario for the economy might not come to pass. Forecasters had expected job losses of 8 million and an unemployment rate of about 20%.
“This looks like the shortest recession in history,” said Chris Rupkey, chief financial economist for MUFG.
Employment rose sharply in sectors such as leisure, hospitality, and retail as states began to reopen last month — the same industries that had seen extreme rates of layoffs as the pandemic struck. The leisure and hospitality sectors saw job gains of 1.2 million, following losses of 7.5 million in April and 743,000 in March. The retail sector gained 368,000 in May, after a loss of 2.3 million in April.
Construction last month gained nearly half of the job losses it suffered in April. Education and health also saw a significant bounce back.
Also, unemployed workers sitting on the sidelines jumped back into the market as the labor force participation rate increased in May.
Altogether, 7.7 million unemployed workers went back to work in May, a sign that many of the employees who were temporarily dismissed during the worst of the pandemic will be able to rejoin their old employers.
Still, the hole that the economy must dig itself out of is extremely deep. More than 18 million people said that they were temporarily unemployed in April.
“The fact of the matter is that when you have a deep economic crisis, regardless of the cause, it takes time to recover back to pre-crisis levels,” said Daniel Zhao, a senior economist and data scientist at Glassdoor. “The economy can’t turn on a dime.”
Mark Hamrick, a senior economic analyst for Bankrate, said the economic recovery will be measured in years, not months, and that the unemployment rate could be 10% in May 2021, which was the height of unemployment during the Great Recession of 2007-2009.
“It’s quite remarkable that we’re looking a year down the road and saying the expectation is that we’ll get to a level that was the peak during the financial crisis. It really does tell us that this isn’t a short event as we had hoped,” he said.
The pandemic upended the strong jobs market in a matter of months. The unemployment rate in February was 3.5%, but then stay-at-home orders were issued to slow the spread of the coronavirus, and businesses deemed nonessential were closed, putting millions of people out of work. As the layoffs mounted, the jobless rate climbed, hitting 14.7% in April, which is the postwar high.
Making matters worse, the current unemployment rate likely understates the number of jobs that have been lost.
The Labor Department ends its survey in the middle of the month, which means the true unemployment number for May is likely higher than will be reflected in Friday’s report, as millions of people lost jobs later in the month, as suggested by the weekly jobless claims.
Neither will the workers who are receiving unemployment benefits through the Pandemic Unemployment Assistance program, enacted by Congress in March to provide aid to unemployed workers who otherwise don’t qualify for regular benefits, necessarily be included in Friday’s jobless count, according to Zhao.
“If somebody is receiving special pandemic assistance, they can be counted as unemployed, but it’s not a guarantee,” he said, adding that “it is likely that the report that will come out tomorrow will understate the actual scale of the crisis.”
Some workers who were absent from their jobs last month because of the coronavirus were incorrectly considered employed in the report when they should have been marked as temporarily unemployed.
If those workers had been correctly categorized, May’s unemployment rate would have been roughly 3% higher than what was reported, making last month’s jobless rate over 16% and an increase from April’s 14.7%.
