In May, the U.S. economy recouped some of the jobs lost in the previous two months.
According to the Bureau of Labor Statistics (BLS), more than 2.5 million jobs were added to payrolls in May. Many economists had forecast another steep loss of about 7 to 8 million jobs after April’s devastating decline. While the 2.5 million jobs gained in May pales in comparison to the revised 20.7 million lost the month before, it is still the largest single monthly gain in U.S. history.
May saw a decline in the headline unemployment rate from 14.7% in April to 13.3% in May. Predictions went as high as 20% for national unemployment in May, but the gradual and staggered reopening of the economy in many parts of the nation appears to be re-filling the temporary layoffs that resulted from the COVID-19 pandemic. While a return to positive job gains and declining unemployment occurred much sooner than many expected, the bankruptcies, business closures, and weakened employment market will likely prevent a sharp “V” shaped recovery. Safety and health concerns, government reopening policies, and a lack of an available vaccine are still dampening consumer confidence and demand and may continue to do so for some time.
In other May BLS data, annual hourly earnings growth for all employees was 6.7% in May and is a reflection of the large number of lower-paying jobs lost recently. The monthly wage figure decreased $0.29 between April and May, but was up $1.88 from May 2019, to $29.75. Previously, annual wage growth had been averaging about 3% with average annual increases of about $0.85.
With the more than 2.5 million jobs this month mitigating the steep job losses from March and April, the employment base in May was still 17.7 million jobs below the May 2019 showing. This was slightly improved from last month’s annual net loss of 20.1 million. Prior to the downturn, the U.S. had been averaging annual gains of around 2 million since 2010. The average annual rate of change plunged from about 1.4% prior to March to -11.7% in May. This recent loss was more than twice the average annual loss rate seen during the Great Recession (-5.0%).
The civilian labor force (CLF) participation rate was 60.8% in May, up 60 bps from April but down 260 bps from February. The CLF increased 1.7 million from April but was still 6.3 million fewer than pre-pandemic February. The employment-population ratio also ticked up from April to 52.8% (from 51.3%) but is also well below February’s rate. The total number of unemployed (20.985 million) is improved by 2.1 million from April, but still much higher than usual. The number of people not in the labor force who currently want a job has shot up from about 5 million pre-COVID pandemic to almost 9 million currently (although improved by about a million from April).
The number of unemployed workers on temporary layoff, which had shot up from about 800,000 in February to more than 18.0 million in April, is about 15.3 million in May as businesses have been allowed to reopen. In a sign that the recovery will take some time, the number of permanent job losers increased to almost 2.3 million in May after averaging about 1.3 million previously. The number of employed part-time workers for economic reasons (10.63 million in May) is still more than twice the pre-pandemic February figure and is almost entirely comprised of part-time workers due to slack work or business conditions.
The U6 unemployment rate, which includes part-timers for economic reasons and marginally attached workers, fell slightly from 22.8% in April to 21.2% in May, still about three times the February rate. Persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work.
The sudden crash of the labor market has not yet affected the number of long-term unemployed workers (out of work for 27 weeks or more), as that number of about 1.2 million is almost even with the level seen in January and February. The number of unemployed for less than five weeks shot up to 14.3 million in April but fell to 3.9 million in May as the employment crisis drags on. That 14 plus million figure is now in the 5 to 14 week category of unemployment.
Industry Focus
The chart of monthly employment gain or loss by industry for May is essentially a reverse mirror image of April, with those industries experiencing the steepest losses previously, now gaining in May (although not close to a rebound). May’s jobs report from the BLS showed gains in most industry sectors. Leisure and Hospitality gained the most jobs back after a steep loss last month, while solid gains were made in Construction, Education & Health Services, and Trade, Transportation, & Utilities. The Government sector experienced sharp losses – primarily at the local level – as revenue declines jeopardize the employment outlook.
• The food services and drinking places subsector (+1,370,600) accounted for all of the Leisure and Hospitality industry’s strong rebound gain of 1.24 million jobs in May as many restaurants and bars reopened to at least partial capacity. The accommodation subsector continued to lose jobs (-148,200), while arts, entertainment, and recreation (+17,500) benefitted from partial re-openings of theaters, casinos, and amusement parks.
• The Construction industry gained 464,000 jobs in May, with both commercial and residential workers returning to active worksites. Both residential and nonresidential specialty trade contractors gained about 160,000 jobs each for the month, and the construction of buildings subsector gained another 104,900 jobs.
• The 424,000 jobs gained in the Education and Health Services industry were primarily in the ambulatory health care services sector (+375,700), with more than half (+244,800) in dentist offices alone. The social assistance sector (+78,300) benefitted from daycare centers (+44,400) and individual and family services (+29,400) subsectors.
• The Trade, Transportation and Utilities industry’s gain of 368,000 jobs in May can be attributed exclusively to retail trade (+367,800), as wholesale trade (+21,400) cancelled losses in transportation and warehousing (-19,000) and utilities (-2,300). Most retail subsectors regained jobs in the 20,000 to 90,000 range, but electronics stores (-94,700) and auto parts stores (-35,800) lost jobs again.
• The Other Services sector (+272,000) saw its biggest rebound in the personal and laundry services subsector (+182,300) as barbers, hair salons, and other previously nonessential personal services businesses reopened to limited capacity.
• Many Manufacturing firms restarted their production lines in May, boosting employment by 225,000 jobs. Durable goods manufacturing gained 119,000 jobs, while nondurable goods manufacturing added 106,000 jobs for the month. Transportation equipment (+26,000), fabricated metal products (+24,800), food manufacturing (+24,900), and plastics and rubber products (+29,800) were the best performing subsectors.
• The Professional and Business Services industry’s gains in May (+127,000) were clustered in only a few subsectors. Services to buildings and dwellings (janitorial, landscaping, cleaning, etc.) regained 68,400 jobs, while the low-paying temporary help services (+39,100) subsector gained about as many jobs as the higher-paying professional and technical services (+39,800) subsector.
• The Financial Activities industry gained 33,000 jobs in May, with rental and leasing services (+20,800) subsector the primary contributor.
• The Mining and Logging industry lost 20,000 jobs in May as the support activities for mining subsector lost 15,700 jobs. A loss of 6,900 jobs in the oil and gas extraction subsector point to continued weakness in the industry due to lower energy prices.
• The Information industry lost 38,000 jobs in May with every subsector feeling the pain. The hard-hit motion picture and sound recording subsector (-10,700) continued to bleed jobs.
• As mentioned above, the Government sector (-585,000) lost jobs in May primarily at the local level (-487,000), while smaller losses occurred at the Federal (-14,000) and state (-84,000) levels.
