WASHINGTON: The US economy regained 2.5 million jobs in May and the unemployment rate dropped as coronavirus pandemic shutdowns began to ease, which President Donald Trump said Friday was a sign the recovery from the crisis is underway.
The all-important Labor Department data showed the largest increase in jobs on record, which pushed the unemployment rate down to 13.3 percent from 14.7 percent in April. The report defied even the most optimistic expectations among economists, who had been expecting a payroll decline of more than eight million and a jobless rate of 20 percent or higher.
Trump, who is counting on a solid economy to convince voters he deserves a second term, immediately cheered the data and said the gains proved the combination of rapid government support and a push to reopen businesses was working.
“Today is probably the greatest comeback in American history, but it’s not going to stop here,” Trump told reporters at the White House, saying the recovery will continue unless “the wrong people get in here,” an apparent reference to the November presidential election.
Trump, who likened the pandemic to a hurricane, has never wavered from his confidence in a sharp, “V-shaped” rebound. “This is better than a ‘V,’ it’s a rocket ship!”
Three points higher
The jobs report attributed the gains to “a limited resumption of economic activity,” but the Labor Department said the jobless rate was likely three points higher due to errors in how workers described their employment status.
A separate report with state data on weekly initial claims for unemployment benefits shows that, as of last week, more than 42 million people have lost their jobs, at least temporarily, since mid-March when the shutdowns to contain the spread of COVID-19 began. But with a massive $3 trillion infusion of government aid and trillions more in lending to businesses, some firms were able to bring workers back.
Democratic House Speaker Nancy Pelosi said the rebound is a testament to “decisive action by Congress,” but emphasized millions of US workers remain jobless. Trump promised to push for a payroll tax cut as well as additional stimulus to ensure the recovery continues, while also signing into law a measure that extends the Paycheck Protection Program (PPP) to 24 weeks from eight.
The reform of the popular small business program lowers the loan amount that must be used for payroll, and extends the loan terms to five years from the original two—changes businesses had been calling for. With states allowing businesses to reopen, employment last month rose sharply in leisure and hospitality, construction, retail trade and education and health services, according to the data.
And the number of workers on temporary layoff declined by 2.7 million to a still-shocking 15.3 million. The gains came despite downward revisions to March and April that subtracted another 690,000 jobs and another sharp decline in government employment, which dropped by 585,000 positions. Pelosi urged lawmakers to pass the proposed Heroes Act, which would funnel resources to state and local governments vulnerable to layoffs, “or else this fragile progress will collapse.”
“With more than 100,000 Americans tragically dead, 21 million still out of work and state and local budgets collapsing, now is the worst possible moment to take our foot off the gas,” she said.
Temporary or permanent?
Some analysts warned it may be too soon to get confident about the recovery since employers may not be able to keep those employees.
Harvard’s Jason Furman notes the reduction in temporary layoffs was “the easy part of the recovery,” and further job gains may come more slowly.
And Diane Swonk of Grant Thornton said it remains to be seen whether the firms rehiring now can keep workers on payroll, citing research by the University of Chicago suggesting “more than 40 percent of those temporary layoffs in April will become permanent.” The data also reflect the time before the killing of George Floyd at the hands of police sparked nationwide protests over racial injustice, along with looting in some cities. – AFP