US jobs market starts miraculous bounceback from Covid-19 crash
Donald Trump hails ‘rocket ship’ recovery as economists scramble to rewrite global forecasts
US EMPLOYERS launched an unexpected hiring blitz last month, confounding expectations of more mass job losses and sparking hopes that America could stage a remarkable coronavirus comeback.
The country added 2.5m jobs in May, official figures showed, confounding predictions of a fall of 7.5m or more in one of the most dramatic forecasting errors in economic history. Unemployment fell to 13.3pc, down from 14.7pc in April. Economists had feared the rate could rise as high as 20pc.
Donald Trump seized on the jobs surge, hailing it as “probably the greatest comeback in American history”.
The president predicted further rapid growth as more states came out of lockdown, adding he expected the economy to recover even more quickly than the rapid “V-shape” bounce that economists had initially hoped for. He said: “This is better than a ‘V’ – this is a rocket ship.”
Meanwhile, economists scrambled to rewrite their predictions for the US and world economies. James Knightley, of ING, said: “Somehow the US jobs market has come back from the brink.
“It suggests the American economy can bounce back very vigorously and we all need to massively revise up our economic projections.”
The Dow Jones and S&P 500 jumped 2.7pc and 2pc respectively after the surprise figures, while the technologyfocused Nasdaq index climbed to a new record high. The FTSE 100 rallied by 2.25pc on hopes that Britain could also recover far more quickly than feared.
Positive US sentiment was bolstered by Bureau of Labor Statistics figures showing evidence that workers laid off in the hardest-hit industries were being rehired in significant numbers. The leisure and hospitality sectors added more than 1.2m jobs in the month. Retailers accounted for 367,000 more, while renewed activity on building sites boosted employment in construction by 464,000. Some 391,000 came in healthcare and social assistance.
The surge suggests that massive stimulus measures to support the unemployed have paid off. America has pumped $2 trillion (£1.6 trillion) into protecting its economy, with most citizens sent a cheque for $1,200.
Some economists have started questioning whether, when the dust has settled, this support could be seen as overkill.
Seema Shah, of Principal Global Investors, said: “Today’s data suggests that the US economy is more resilient than expected. It also raises the question: does the US really need as much policy support as it is receiving?”
Despite the surge in hiring, analysts noted there was still a long way to go before employment recovered.
Earlier this year, the US jobless rate stood at a record low of 3.5pc. Since then, more than 40m workers have been laid off. Neil Williams, of Federated Hermes, said: “The first rise since the virus, [these numbers] give hope that as some US states reopen, gradually returning furloughed workers may be outnumbering those losing jobs.
“Hopefully, this can continue, but delivering the US economy to health still faces some very high hurdles.”
Some industries suffered another fall in employment, including the mining and logging sectors, transport and warehousing.
Public sector jobs are also disappearing, with a drop of 585,000, in part driven by local governments axing teachers while schools are shut. There are also fears that some industries will take a long time to recover to their previous size, if they ever do manage to fully repair the damage.
Gregory Daco, of Oxford Economics, said: “We foresee a labour market recovery in two phases: rapid growth in the second half of 2020 as economic activity rebounds from very low levels, followed by a more gradual recovery in 2021 to 2023.”
Although 60pc of lost jobs will come back rapidly, Mr Daco still expects unemployment to stand at between 8pc and 10pc by the end of the year.