In our preview of today's historic job's report we said that on one hand "the labor picture will be far worse than anything observed before in US history, eclipsing the darkest days of the Great Depression"; on the other nobody will care and markets will likely soar as the report "tells us what we already know" and there is "little in the BLS report that will offer any forward-looking insight – that will depend on progress regarding the reopening of economies, and official support measures."
Well, take all that and throw it out of the window, because moments ago the BLS shocked markets when it reported that, contrary to week after week of millions in initial jobless claims, and in line with the much more optimistic ADP report, not only did May payrolls not drop by the 7.5 million expected drop, but actually SOARED by 2.5 million, crushing expectations, and indicating that already in May when the country was under widespread lockdowns, jobs came soaring back.
The May payrolls print was revised down by 492,000, from -881,000 to -1.4 million, and the change for April was revised down by 150,000, from -20.5 million to -20.7 million. With these revisions, employment in March and April combined was 642,000 lower than previously reported. After revisions, job losses have averaged 6.5 million per month over the past 3 months.
Commenting on the number, the BLS said that "total nonfarm payroll employment increased by 2.5 million in May, reflecting a limited resumption of economic activity that had been curtailed due to the coronavirus pandemic and efforts to contain it. Employment fell by 1.4 million and 20.7 million, respectively, in March and April. Despite the over-the-month increase, nonfarm employment in May was 13 percent below its February level. Large employment increases occurred in May in leisure and hospitality, construction, education and health services, and retail trade. Government employment continued to decline sharply."
Just as shocking is that the unemployment rate which was expected to surge to a record 19.1% in May from 14.7% in April, actually declined in May to 13.3% (although Black unemployment did rise modestly).
Total employment, as measured by the household survey, rose by 3.8 million in May to 137.2 million, following a large decline in April. After an 8.7 percentage-point decline in April, the employment-population ratio rose by 1.5 percentage points to 52.8 percent in May.
And in continuing the bizarro world of now completely meaningless data, the average hourly earnings dropped from last month's revised 8.0% actually dropped to 6.7%, also mocking expectations of an increase to 8.5%.
The average hourly earnings for all employees on private nonfarm payrolls fell by 29 cents to $29.75, following a gain of $1.35 in April. Average hourly earnings of private-sector production and nonsupervisory employees decreased by 14 cents to $25.00 in May. The decreases in average hourly earnings largely reflect job gains among lower-paid workers; this change put downward pressure on the average hourly earnings estimates.
The average workweek for all employees on private nonfarm payrolls increased by 0.5 hour to 34.7 hours in May. In manufacturing, the workweek rose by 0.8 hour to 38.9 hours, and overtime increased by 0.3 hour to 2.4 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls increased by 0.6 hour to 34.1 hours. While employees in most industries saw an increase in their workweeks in May, the employment changes, especially in industries with shorter workweeks, complicate monthly comparisons of the average weekly hours estimates.
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How "political" was today's report? We will leave it to readers to decide especially when moments after the report Trump, who knew the numbers yesterday, boomed on his twitter account that "THESE NUMBERS ARE INCREDIBLE"
THESE NUMBERS ARE INCREDIBLE! @MariaBartiromo— Donald J. Trump (@realDonaldTrump) June 5, 2020
And just in case anyone missed his first tweet, he then repeated:
I am so stunned. I’ve never seen numbers like this and I’ve been doing this for 30 years! Steve M. @MariaBartiromo— Donald J. Trump (@realDonaldTrump) June 5, 2020
Political or not, the report noted that the number of unemployed persons who were on temporary layoff decreased by 2.7 million in May to 15.3 million, following a sharp increase of 16.2 million in April. Among those not on temporary layoff, the number of permanent job losers continued to rise, increasing by 295,000 in May to 2.3 million.
Also in May, the number of unemployed persons who were jobless less than 5 weeks decreased by 10.4 million to 3.9 million. These individuals made up 18.5 percent of the unemployed. The number of unemployed persons who were jobless 5 to 14 weeks rose by 7.8 million to 14.8 million, accounting for about 70.8 percent of the unemployed. The number of long-term unemployed (those jobless for 27 weeks or more), at 1.2 million, increased by 225,000 over the month and represented 5.6 percent of the unemployed.
The labor force participation rate increased by 0.6 percentage point in May to 60.8%, following a decrease of 2.5% in April.
The number of persons employed part time for economic reasons, at 10.6 million, changed little in May, but was up by 6.3 million since February. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs. This group includes persons who usually work full time and persons who usually work part time.
The number of persons not in the labor force who currently want a job, at 9.0 million, declined by 954,000 in May, after increasing by 4.4 million in April. These individuals were not counted as unemployed because they were not actively looking for work during the last 4 weeks or were unavailable to take a job.
Looking at a breakdown by industry
- Employment in leisure and hospitality increased by 1.2 million, following losses of 7.5 million in April and 743,000 in March. Over the month, employment in food services and drinking places rose by 1.4 million, accounting for about half of the gain in total nonfarm employment. May's gain in food services and drinking places followed steep declines in April and March (-6.1 million combined). In contrast, employment in the accommodation industry fell in May (-148,000) and has declined by 1.1 million since February.
- Construction employment increased by 464,000 in May, gaining back almost half of April's decline (-995,000). Much of the gain occurred in specialty trade contractors (+325,000), with growth about equally split between the residential and nonresidential components. Job gains also occurred in construction of buildings (+105,000), largely in residential building.
- Employment increased by 424,000 in education and health services in May, after a decrease of 2.6 million in April. Health care employment increased by 312,000 over the month, with gains in offices of dentists (+245,000), offices of other health practitioners (+73,000), and offices of physicians (+51,000). Elsewhere in health care, job losses continued in nursing and residential care facilities (-37,000) and hospitals (-27,000). Employment increased in the social assistance industry (+78,000), reflecting increases in child day care services (+44,000) and individual and family services (+29,000). Employment in private education rose by 33,000 over the month.
- Employment in retail trade rose by 368,000, after a loss of 2.3 million in April. Over-the-month job gains occurred in clothing and clothing accessories stores (+95,000), automobile dealers (+85,000), and general merchandise stores (+84,000). By contrast, job losses continued in electronics and appliance stores (-95,000) and in auto parts, accessories, and tire stores (-36,000).
- Employment increased in the other services industry in May (+272,000), following a decline of 1.3 million in April. About two-thirds of the May increase occurred in personal and laundry services (+182,000).
- Manufacturing employment rose by 225,000, with gains about evenly split between the durable and nondurable goods components. In April, manufacturing employment declined by 1.3 million, with about two-thirds of the loss occurring in the durable goods component. Within durable goods, employment gains in May were led by motor vehicles and parts (+28,000), fabricated metal products (+25,000), and machinery (+23,000). Within nondurable goods, job gains occurred in plastics and rubber products (+30,000) and food manufacturing (+25,000).
- Professional and business services added 127,000 jobs in May, after shedding 2.2 million jobs in April. Over the month, employment rose in services to buildings and dwellings (+68,000) and temporary help services (+39,000), while employment declined in management of companies and enterprises (-22,000).
- Financial activities added 33,000 jobs over the month, following a loss of 264,000 jobs in April. In May, employment gains occurred in real estate and rental and leasing (+24,000) and in credit intermediation and related activities (+7,000).
- Wholesale trade employment was up by 21,000 in May, largely reflecting job gains in its nondurable goods component (+13,000). In April, wholesale trade employment declined by 383,000.
- Employment continued to decline in government (-585,000), following a drop of 963,000 in April. Employment in local government was down by 487,000 in May. Local government education accounted for almost two-thirds of the decrease (-310,000), reflecting school closures. Employment also continued to decline in state government (-84,000), particularly in state education (-63,000).
- Employment in information fell by 38,000 in May, following a decline of 272,000 in April.
- Mining continued to lose jobs in May (-20,000), with most of the decline occurring in support activities for mining (-16,000). Mining employment has declined by 77,000 over the past 3 months.
- Transportation and warehousing jobs decreased in May (-19,000), after an April decline of 553,000. Air transportation lost 50,000 jobs over the month, following a loss of 79,000 jobs in April. In May, employment rose by 12,000 in couriers and messengers and 10,000 in transit and ground passenger transportation.
So does this fantastic jobs report mean the Fed has to hike soon?