US adds 2.5m jobs as unemployment dips to 13.3%

• US NFP increased 2.5m in May

• The unemployment rate fell to 13.3%

• Wage growth declined 1.0% mom and 6.7% yoy

• Labor force participation rate increased to 60.8%

• The labor market recovery may have come sooner than expected, but it could take a long time to pick up the pieces

The US employment increased by 2.5m in May, defying consensus’ expectations of further losses and offering hope that the rebound from the pandemic-induced economic crisis could be faster than forecast. We know from continuing claims data that the labour market started to turn a corner in the second week of May, but latest result is much stronger than that data suggested. Meanwhile, the record loss of jobs in April was revised up slightly to 20.7m. Job losses in March were raised to 1.4m from 881,000. On net, revisions added 642,000 to the already staggering job losses for the two months. Despite the over-the-month increase, non-farm employment in May was 13% below its February level.

With states beginning to re-open their economies to varying degrees, 9 of 13 industries added jobs in the month with nearly half the gains coming in the hard-hit leisure & hospitality sector. Employment in leisure and hospitality increased by 1.2m, following losses of 7.5m in April and 743,000 in March. Jobs in bars and restaurants increased by 1.4m as states began to relax social distancing measures. Employment rebounded by 464,000 in construction, by 368,000 in retail and by 225,000 in manufacturing. The health-care industry also began to recover from record job losses in April, boosting employment by 312,000. The only segment to shed another large chunk of jobs was government. Employment fell by 585,000, mostly reflecting school closures that put bus drivers, cafeteria staff and others out of work.

The unemployment rate, meanwhile, slipped to 13.3% in May from a post-war record of 14.7% in April as the number of persons on temporary layoff declined by 2.7m. Participation rate also rose 0.6% to 60.8%. We also saw improvement in what has become a converse economic indicator, average hourly wages fell in May, -1.0% mom and -6.7% yoy, as job gains were concentrated in lower-wage workers who have been hit particularly hard by the coronavirus crisis.

Source: BIMB Securities Research - 9 Jun 2020