American businesses unexpectedly added jobs in May, a sign the U.S. economy is rebounding faster than anticipated from the sharpest economic slowdown of the postwar era.
Nonfarm employers added 2.5 million workers last month, pushing the unemployment rate down to 13.3 percent, a sharp turnaround from the loss of 8 million jobs expected by Wall Street analysts that would have pushed unemployment to 19.8 percent.
The report “can only be described as spectacular,” Torsten Slok, chief economist at Deutsche Bank, told FOX Business. “There’s still a long road ahead, to be sure, but the fact that number was 10 million better than what was expected really does reveal that the economy, at least where we stand now, is improving quicker than what anyone had expected.”
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The U.S. economy, which shrank by 5 percent in the three months through March, according to an updated estimate from the Commerce Department, is still mired in its sharpest contraction since the end of World War II. Economists up and down Wall Street expect it will shrink at an annualized rate of at least 30 percent in the second quarter.
Job losses in April totaled 20.7 million, a level last seen during the Great Depression, as non-essential businesses were closed to help slow the spread of COVID-19, and almost 43 million Americans have filed new jobless claims over the past 11 weeks.
Leisure and hospitality, retail and construction were among the hardest-hit sectors of the economy, and saw some of the biggest payroll gains in Friday’s report. The leisure industry added 1.24 million positions, while retail hired 368,000 employees and construction payrolls expanded by 464,000 jobs.
“The fact that small businesses and particularly restaurants presumably were able to bring some of their workers back, I think would reflect PPP [Paycheck Protection Program] since it happened before the economic activity actually recovered,” Michelle Meyer, chief U.S. economist at Bank of America, told FOX Business.
The PPP, created as part of the Trump administration’s $2.2 trillion CARES Act stimulus program, provides forgivable loans of up to $10 million to small businesses with the goal of helping them keep employees on the payroll while being shuttered amid COVID-19 stay-at-home orders.
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Meyer said the initial surge in jobs can be attributed to “straightforward hiring” due to employers cutting too many workers, but that a portion of the labor force, particularly in retail and hospitality, will struggle to find employment because the sector won’t “come back to the capacity that it was running at prior to the downturn.”