The U.S. unemployment rate unexpectedly dropped to 13.3 percent in May, down from a record high in April, indicating the nation's economy is recovering faster than expected from the coronavirus lockdown.
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The Labor Department said in its Friday report that employers added a stunning 2.5 million jobs in May -- the biggest increase on record. The economy shed a combined 22.1 million jobs in April and March, meaning there are an estimated 21 million Americans currently out of work.
Economists surveyed by Refinitiv expected the report, conducted in mid-May, to show that unemployment rose to 19.8 percent in May and that employers shed 8 million jobs. If the expectation had been accurate, it would have been the worst figure since the Great Depression.
“Barring a second surge of Covid-19, the overall U.S. economy may have turned a corner, as evidenced by the surprise job gains today, even though it still remains to be seen exactly what the new normal will look like," said Tony Bedikian, head of global markets at Citizens Bank.
The jobless rate dropped from 14.7 percent in April, which was the highest level ever since record-keeping began in 1948. The surprise decline, combined with the surge in jobs, suggests the worst is over for the nation's economy as states ease stay-at-home guidelines and businesses bring back staff.
Stocks roared higher following the report, with the Dow Jones Industrial Average pointing to an open nearly 600 higher.
"Today was a shocking jobs number – and for the first time this year it was a positive shock," said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. "It’s very encouraging to see workers being recalled back by their employers and the unemployment rate dropped back down in May."
Leisure and hospitality, the sector hit hardest by the outbreak of the virus, accounted for almost half of the increase, with more than 1.2 million employees returning to their jobs last month. In April, the industry lost a staggering 7.6 million jobs.
More than 1.3 million workers returned to food services and drinking places as states gradually allowed businesses deemed nonessential to reopen.
Construction also saw a significant jump in employment last month: The sector added 464,000 jobs. Education and health services increased by 424,000 and retail climbed by 368,000.
The number of unemployed Americans who reported being temporarily laid off decreased by 2.7 million in May, representing the majority of the jobs that returned. Among those who said they were not temporarily laid off, the number of permanent job losses continued to increase, rising by 295,000 in May to 2.3 million.
Over the course of the past few weeks, every state has started to navigate reopening their economies. But the unemployment level, which remains at the highest level since the Depression, is expected to remain elevated as social distancing guidelines remain in place.
"It's important to remember the labor market still faces an unemployment rate at the highest level since the Great Depression with tens of millions of Americans still out of work," said Daniel Zhao, a Glassdoor senior economist. "While the labor market may be on the path to recovery, there is still a long way to go until the labor market returns to pre-crisis levels and makes up for lost growth.”