WASHINGTON — U.S. unemployment dropped unexpectedly in May to 13.3% as reopened businesses began recalling millions of workers faster than economists had predicted, triggering a big rally Friday on Wall Street and giving President Donald Trump something to boast about in his reelection bid.
The jobless rate is still on par with what the nation witnessed during the Great Depression. And for the second straight month, the Labor Department acknowledged making errors in counting the unemployed during the coronavirus outbreak, saying the real figure is worse than the numbers indicate.
Still, after weeks of dire predictions by economists that unemployment in May could hit 20% or more, the news that the economy added a surprising 2.5 million jobs last month is evidence that the employment collapse most likely bottomed out in April, when the rate reached 14.7%.
Most economists had expected rehiring to kick in this summer as lockdowns were increasingly lifted and people gradually resumed shopping and eating out.
“The surprising thing here is the timing and that it happened as quickly as it did,” said Adam Kamins, senior regional economist at Moody’s Analytics.
At the same time, economists warn that after an initial burst of hiring as businesses reopen, the recovery could slow in the fall or early next year unless most Americans are confident they can shop, travel, eat out and fully return to their other spending habits without fear of contracting the virus.
“We are witnessing the easiest phase of growth as people come off temporary layoffs and come back to their employers,” said Jason Furman, a Harvard economist and former top adviser in the Obama White House. “And once employers are done recalling people, the much harder, longer work of recovery will have to proceed.”
On Wall Street, the Dow Jones Industrial Average gained nearly 830 points, or more than 3%, and the broader S&P 500 closed 2.6% higher on the news. The S&P is now just 5.7% below its pre-pandemic peak, after plummeting 34%.
An exultant Trump seized on the report as evidence that the economy is going to come back from the coronavirus crisis like a “rocket ship.”
“This shows that what we’ve been doing is right,” said the president, who has pushed governors aggressively to reopen their economies amid warnings from public health officials that the country is risking a second wave of infections on top of the one that has killed over 100,000 Americans.
Kamins and other economists credited the government’s small-business lending effort, the Paycheck Protection Program, with encouraging employers to rehire. Overall, Washington has provided about $3 trillion in emergency relief funds during the crisis.
Nearly all industries added jobs last month, a sharp reversal from April, when almost all cut them. Hotels and restaurants added 1.2 million jobs in May, after shedding 7.5 million. Retailers gained 368,000, after losing nearly 2.3 million in the previous month.