Total nonfarm employment in America surged by 2.509 million payrolls in May, according to data out this morning from the Bureau of Labor Statistics. That was significantly better than the -7.725 million loss analysts anticipated and quite the reversal from April’s downward-revised -20.687 million print. The severe job losses in March and April were expected because the efforts to stem the spread of the coronavirus basically brought the entire U.S. economy to a sudden halt. In May, however, states started to reopen, and it appears many Americans were able to return to work much sooner than even some of the most optimistic economists had expected. Although last month’s big gain does not make up for the April plunge and there are still over 21 million Americans collecting unemployment insurance, this morning’s job report is another encouraging sign that economic activity in this country has likely already bottomed.
Similar data was released by ADP earlier this week and while it did not show a net gain in employment it did confirm the substantial month-over-month improvement in the labor market. Specifically, 2.760 million private-sector payrolls were lost in May, much better than April’s -19.557 million decline and nowhere near the -8.663 million loss analysts had predicted. Even more interesting is that the total number of separations reported by businesses with 1-49 workers in May was 92 percent smaller than what was announced in April (-0.435 million vs. -5.276 million), whereas larger firms experienced a less substantial month-over-month decrease in layoffs. Moreover, small businesses accounted for just 16 percent of all job losses in May while big employers (500+ workers) represented 58 percent of total separations. This dichotomy is likely in part related to the extra financial support small businesses have received from the SBA’s Paycheck Protection Program (PPP). The operations of smaller brick-and-mortar companies were also typically more exposed to the lockdowns, so these businesses would naturally benefit the most from the reopening of the economy that began in May. With respect to larger companies, their still relatively elevated level of layoffs is more concerning because it could signal that some of the job losses will be permanent.
Most of the separations, though, for now appear temporary, and the official measure of unemployment (U-3) fell to 13.3 percent in May and should keep declining over the next few months if the economic reopenings continue to go well and the dreaded “second wave” of the pandemic is avoided. Perhaps most striking from the recent labor market data is that there are dramatic differences in joblessness when adjusting for educational attainment. For example, the unemployment rate for Americans aged 25 and over without a high school diploma was 18.5 percent in May but just 7.2 percent for those who have graduated college. Advanced degrees also appear worth the investment, with the rate of joblessness even as low as 3.5 percent last month for those with a doctoral degree. None of this should be too surprising since the ability to work remotely increases with educational attainment. Earlier Labor Department data, for instance, revealed that roughly 9 in 10 employed Americans without any college education had occupations that required them to show up in person for work, whereas more than half of those with at least a bachelor’s degree said they could work from home. Clearly the ability to work remotely can be very advantageous in a situation where the government decides millions of Americans are suddenly “non-essential” and orders them to stay at home.
Sources: Econoday, U.S. DoL, ADP, FRBSL