May BLS Report Stuns All with Job & Pay Gains, Unemployment Drops

The latest jobs numbers are out from the U.S. Bureau of Labor Statistics. What do they mean for job seekers, employers and investors? Here’s a quick take from Glassdoor Senior Economist Daniel Zhao: So far, 2020 has delivered many surprises and did so again with a jobs report that surprised all. The labor market showed the first green shoots of recovery in May, in a complete reversal from expectations. The unemployment rate dropped to 13.3 percent in May as payroll employment increased by 2.5 million, according to today's report from the Bureau of Labor Statistics. Most economists had expected another grim jobs report with the unemployment rate to rise to 20 percent and job losses to number in the millions.  The surprisingly good news may be attributed to states reopening in April and early May with  businesses rehiring workers again. Payrolls increased most in some of the earliest-hit industries: leisure and hospitality (+1.2 million), construction (+464,000), retail (+367,800) and health care (+312,000). One notable weak spot in hiring was government (-585,000), likely due to the crisis's effect on state budgets. Additionally, the number of workers on temporary layoff declined by 2.7 million, while the number of permanent job losers climbed by 385,000. The decline in workers on temporary layoff clearly indicates that the resumption of normal economic activity is a key driver for this surprise improvement in the labor market. However, the increase in permanent job losers is a concerning indicator that may protract the length of the recovery. The surprise may be partially attributable to the steady drumbeat of unemployment insurance (UI) claims which have been a useful real-time indicator during this crisis, but may now be a lagging indicator, only capturing layoffs without accounting for the rehiring of workers that happened in May. Today’s report feels like a relief for many, but it's important not to be caught up in performance compared to expectations. This report still shows an unemployment rate at the highest level since the Great Depression with tens of millions of Americans out of work. While the labor market may be on the path to recovery, there is still a long way to go until the labor market returns to pre-crisis levels and makes up for lost growth. More Insights Unemployment dropped to 13.3 percent; however, this is still higher than the peaks during the Great Recession and is the highest level since the Great Depression. Similarly, payrolls up 2.5 million is good news, but we're still only at 2011 levels. There's still a long way to go before we return to pre-crisis levels. Leisure & hospitality led the rebound in May, followed by construction, health care and retail. Government payrolls declined, largely driven by local governments who are in a severe budget crunch right now. Information (including media) also continued to fall. A different view of the industry data shows that the hardest hit industries were the fastest to rebound. Some notable laggards are government and information. The modest improvement in professional & business services is also something to watch in future months as impacts to that industry should be due to declining demand more than restrictions on non-essential businesses Workers on temporary layoff dropped by 2.7 million as businesses started rehiring. However, permanent layoffs rose by almost 400,000. Every layoff that turns permanent makes a full recovery harder. The decline in the total unemployment rate masks an increase in unemployment for African Americans in May, widening the black-white unemployment gap. For added reference, it took almost 10 years after the Great Recession for the gap in black-white unemployment to return to pre-recession levels. To speak with Daniel Zhao about today’s jobs report or to discuss labor market trends, contact pr at Glassdoor dot com. For the latest economics and labor market updates, follow @danielbzhao on Twitter and subscribe to Glassdoor Economic Research.