A completely unexpected U.S Jobs report surprises Economists
The historic and shocking NFP report saw the American economy add 2.5 million jobs throwing analysts’ estimates in a tailspin
We have seen so many records break this year when it comes to economic numbers that this recent indicator was almost not a surprise, but the difference between the expected and actual numbers was so massive that is got the economists scratching their heads. What just happened?… was exactly my reaction when the U.S & Canadian Job numbers got reported this past Friday.
The pandemic-driven global recession has already been termed as the worst economic downturn by the IMF since the Great Depression, producing historic losses in financial markets and precipitating a complete collapse in commodities led by the “Black Gold.” The rebound of the Global equities from the historic lows has been nothing short of extraordinary as well. And now add to that, record-breaking jobs report out of the U.S for the month of May.
In fact, the surprise addition of 2.5 million job adds was the most in the history of the U.S. labor force. The analysts and economists were expecting job losses amounting to 8 million! Stocks that were already in a buoyant mood staged a massive rally seeing the benchmark Dow soared 829.16 points (or 3.15%) with the S&P 500 and Nasdaq posting gains of 2.62% and 2.06% respectively.
For the past couple of weeks, the investors’ focus has strongly remained on the reopening of the global economy despite domestic civil unrest in the U.S & rising economic tensions between China and the United States. The surprising uptick in the U.S equities which was initially driven by tech stocks is now seeing a much more broad-based rally — with financials, industrials, and the badly battered Airline stocks joining the bandwagon.
The current U.S unemployment rate, at 13.3%, is below the 14.1% recorded in May and sharply lower than forecasts of up to 20%. Nevertheless, the job losses come in the face of mounting jobless claims—which now total more than 40 million American workers. The jobless claims have been slowing down, however, since the panic ensued.
According to the report from the Bureau of Labor Statistics, overall the unemployment rate declined for adult men and women and for white & Latino workers. There was a worrying trend in between the lines — joblessness barely budged for Black and Asian American workers, in addition to workers under 20 years old.
Also, the Labor Dept.’s report captures data from employers and state unemployment offices by the 12th of every month, leaving almost data for two-thirds of the month unaccounted for. While the headline number paints an optimistic picture, with many of the furloughed workers returning to work, the underlying economic damage is still extensive.
21 million Americans remain out of work, 10.6 million are working part-time, but they wish to be full-time & another 4.4 million are entirely out of the workforce, but they want their jobs back. If continuing claims for unemployment insurance decreases again next week, we would know if the trend is in the right direction or if it was a one-off bounce in the unemployment rate.
North of the border, the Canadian Labor market showed a similar bounce — as the economy gained almost 290,000 jobs where it was expected to lose about 500,000.
If nothing else, the completely surprising jobs report vouches for a V-shaped recovery that so many optimists are expecting after the second quarter. Although the job gains were uneven, the market investors are speculating that the worst may be behind us in terms of unemployment, manufacturing, and consumer spending.
At least the data we have seen this week suggests so.
P.S: I have added a comment about the BLS error in the Responses below with the correct chart for unemployment rates.