On Friday, June 6th, the Bureau of Labor Statistics released its jobs report for May, and the results left economists, including myself, surprised. As COVID-19 raged throughout the country economic activity contracted. Businesses were forced to operate remotely. Customers were less likely to come out to purchase goods and services. Naturally, as revenue decreased, firms looked to cut costs and jobs were lost. As the virus continued to spread, economists expected economic activity to continue to decline.
The unemployment rate fell from 14.7% in April to 13.3% in May. This came after unemployment skyrocketed up from 4.4% in March. The unemployment rate of 14.7% in April was the highest ever recorded by the U.S. Bureau of Labor Statistics. May is not much better. An unemployment rate of 13.3% is merely the second-highest ever recorded. The surprise is the trend line. Few expected unemployment to fall. The drop suggests that economic activity is beginning to adjust to the new reality.
The total number of employees on nonfarm payrolls shows a more complete picture of the economic damage caused by the virus. The total number rose from 130,403,000 to 132,912,000 from April to May. However, that growth is far outweighed by the previous loss of 21,499,000 jobs from March to April. That said, a month where more jobs are created than lost is not a bad sign. In fact, the growth of around 2.5 million jobs was the largest ever recorded in a single month.
The growth in jobs is at least partially attributable to the CARES act, which passed on March 25th. The act sent most Americas a check for $1,200 to help offset the loss in income from job loss. That encouraged people to continue engaging in economic activity to stimulate businesses to promote job growth. The act also provided 500 billion dollars for corporations in struggling industries and 377 billion dollars in small business loans. And provided 153.5 billion dollars for public health initiatives to curb the spread of COVID-19. The infusion of money into the economy has at least halted the contraction in May. The CARES act also increased unemployment benefits as an attempt to incentivize people to stay home and prevent the spread of the virus. It also aimed to help cover essential costs like housing, health services, and food in a turbulent economic time. Those benefits are set to expire on July 31st. It should incentivize more people to return to work if there is a job for them to return to.
It will be interesting to see how that change in incentives affects the economy and the spread of the virus.
Feature Photo Credit: The Los Angeles Times