Recently here in Baltimore, the temperature is around 96° F, or 36° C, and in Toronto, it’s around 84° F, or 29° C, both much hotter than normal for this time of year.
And the US and Canadian economies were also running much, much hotter than could have ever been imagined a few months ago, posting stunning job gains compared to expectations of huge losses, and compared to even larger losses the previous month. It would appear that both economies have hit bottom and are on the rebound.
In the US, jobs rose a stunning +2.5 million jobs in May. It was literally stunning – the TV reporter I was watching had to stop, pause, squint, and re-read the number, with a “this can’t be right… I must be reading this wrong” look on his face. Economists and commentators had known that April was likely to have been the worst, but they were still expecting big job losses in May since many States were far from fully open. April job losses had set a record -21 million jobs so expectations were for a big improvement this month to a loss of only -8 million jobs. Instead, we got a massive gain of +2.5 million jobs, more than twice the previous record increase going back to 1939. The unemployment rate was equally stunning, actually falling from 14.7% to 13.3% versus much gloomier predictions of a sharp increase to 19.5%, which would have been the worst since the Great Depression.
The details of the report were superlative:
- Job gains were widespread across almost all industries.
- The biggest winner was leisure and hospitality which gained 1.2 million jobs, eight times the previous record vs. a loss of -7.5 million in April. Almost all of the gains in that sector came in restaurants and bars.
- The labor force participation rate rose a very sharp +0.6% from 60.2% to 60.8% as the labor force grew by 1.7 million people, the second-largest increase ever.
- The employment to population ratio rose an even more impressive 1.5% vs. the previous record of +1.0%, from 51.3% to 52.8%.
- Average weekly hours worked rose a gargantuan +0.5 hours (previous record +0.2) to 34.7 hours, the highest on record.
- Hourly wages fell -0.3% as workers in lower wage-earning jobs returned.
It’s no accident that the headline increase of +2.5 million very closely reflected the -2.7 million decrease in temporary layoffs. In other words, workers who had been laid off in the previous two months went right back to work in May, just as they thought they would. The data suggests that the idea the economy could just be simply be re-opened appears to have actually worked in May.