The Labor Department report for May was supposed to be a foregone conclusion: millions more jobs lost, and unemployment, already the worst since the Great Depression, climbing still higher.
But when the latest data were released Friday morning at 8:30, traders, economists, policy analysts, and everyone else who sits in front of their computer waiting for the news each month were blown away. The jobless rate dropped and employers were hiring again.
The pros had gotten it wrong. Dead wrong.
“It’s certainly a shocker,” said Tony Bedikian, head of global markets at Citizens Bank in Boston.
There was an issue with the data that skewed the numbers somewhat. Moreover, the unemployment rate worsened for Black Americans. And economists cautioned the job market suffered such a devastating blow — 21 million people are still out of work — that a full recovery could be years away.
Still, for a country coping with the coronavirus, an economic meltdown, and social unrest, the news was a welcome surprise.
Here are the key takeaways.
Lifting COVID-19 restrictions on businesses has put people back to work faster than expected.
Some 2.5 million jobs were created last month, according to the government’s survey of employers. The gains — compared with forecasts of losses of more than 8 million — reflect “that the reopening of the economy in May was earlier, and more robust, than projected," Labor Secretary Eugene Scalia said in a statement.
The unemployment rate declined to 13.3 percent in May from 14.7 percent in April, and the number of people without jobs fell by 2.1 million. These numbers were derived from a separate survey of households.
The job gains came in industries that took the first and hardest hits from the coronavirus.
Leisure and hospitality added 1.2 million jobs, with restaurants and bars serving up growth, offsetting continued losses at hotels. Construction employment increased by 464,000, recouping almost half of April’s decline.
The health care sector added 312,000 positions, with dentists’ offices seeing the biggest recovery, but job losses continued at nursing and residential care facilities, and hospitals. Private education employers brought on 33,000 workers last month, while retailers added 368,000.
“The jobs report is an unambiguous positive, with people getting back to work sooner than anyone expected,” said Luke Tilley, chief economist of Wilmington Trust. “We remain cautious though, as we don’t expect the rate of rehiring to continue.”
Investors, who have been pushing stock prices higher since late March, saw the news as validation of their bullishness.
The Dow Jones industrial average jumped 829 points, or 3.2 percent, to close at 27110.98. The index is up 46 percent since bottoming out in March, cutting its loss for the year to 5 percent.
The trillions of dollars in government stimulus is helping.
The ranks of workers on temporary layoff decreased by 2.7 million in May to 15.3 million, following a brutal increase of 16.2 million in April. That, coupled with the gains seen at bars, restaurants, and retail stores, suggested that the Paycheck Protection Program has encouraged employers to bring back some staff.
“A lot of that has probably been driven by PPP,” said Shannon Saccocia, chief investment officer at Boston Private.
Meanwhile, the number of workers who were permanently laid off rose by 295,000 to 2.3 million.
While the unemployment rate for whites dropped to 12.4 percent, it rose to 16.8 percent for Blacks. Hispanics saw a dip to 17.6 percent, but that’s still higher than other groups. The rate among Asians was little changed at 15 percent.
The data are a bit iffy.
The pandemic has made it harder for the Bureau of Labor Statistics and the Census Bureau to conduct surveys of businesses and households for the monthly jobs report.
With call centers closed and interviewers working remotely, the response rates to the surveys were lower — by nearly 15 percentage points in the case of the household survey.
And for the second straight month, BLS said some workers who should have been marked as unemployed and on temporary layoff were instead counted as employed. It estimated that if these workers had been correctly categorized, the jobless rate would have been about 3 percentage points higher, or more than 16 percent.
“It’s hard to do a survey like this when loads of small firms are shuttering and the classifications are confusing,” said Megan Greene, a senior fellow at Harvard’s Kennedy School. “This jobs report is not consistent with anecdotal evidence or higher frequency data” such as weekly jobless claims, she said.
The government calculates unemployment in other ways that show just how painful the job market’s collapse has been.
Tom Kochan, a professor at the MIT Sloan School of Management, said that on top of the 13.3 percent official jobless rate, another 6 percent had given up looking for work, and another 3 percent were classified as employed, but were really out of work.
“So somewhere between 20 and 22 percent of the labor force are actually out of work.”
The pickup in hiring will have political ramifications.
States may accelerate their pace of reopening to get even more people back to work, especially since federal aid will expire this summer.
President Trump, who has been pushing governors to more quickly lift COVID-19 restrictions, said the economy was poised for a V-shaped recovery — a steep decline follow by an explosion in growth.
“We’ve been talking about a V. A V is wonderful. This is better than a V. This is a rocket-ship,” the president said Friday.
Saccocia of Boston Private said there was a danger Washington would get complacent and pull support before all workers were back on their feet.
“What could prove incorrect is the assumption that the stimulus and unemployment benefits were enough to insulate lower-wage workers who were most impacted,” she said.
We are not out of the woods.
Employers cut more than 22 million jobs in March and April, so last month’s gains represent just a small bounce back. The unemployment rate and pace of layoffs remains at Depression-like levels, despite the recent improvement.
Moreover, not all parts of the country will recover at the same pace.
“One important thing to keep in mind is that the Northeast, especially New York but including Boston as well, was hit much, much harder than the rest of the country," said Peter Ireland, an economics professor at Boston College. “So we will be slower to recover as well.”