KEY POINTS

  • The May unemployment rate was put at 13.3% after the economy added 2.5 million jobs for the month
  • Economists cautioned against reading too much into the numbers and noted most of the new jobs were "low quality," may less than the mean $840 a week
  • Presumptive Democratic president nominee Joe Biden said Trump is wrong in saying the company has come "through the pandemic"; rather, he said, we still "are in its thralls"

President Trump hailed Friday’s May unemployment report as an indication the coronavirus recession has run its course, saying the U.S. economy was poised to recover like a “rocket ship.” Economists, however, remain cautious about drawing such conclusions based on better-than-expected figures. 

The Bureau of Labor Statistics reported the May jobless rate fell to 13.3% from 14.7% in April. The drop was a surprise to economists, who had predicted a loss of an additional 8 million jobs that would push the unemployment rate to 20%. Instead, BLS said the economy gained 2.5 million jobs as states began reopening economies that had been shut down since mid-March when the coronavirus pandemic began taking hold.

“This is better than a V[-shaped recovery],” Trump said from the White House Rose Garden. “This is a rocketship. This is wonderful. … This was the greatest recovery in history.”

Democratic nominee Joe Biden said Trump's remarks were tone deaf to the millions of Americans who have lost their jobs and remain on unemployment rolls.

“I was disturbed … to see the president crowing this morning — basically hanging a ‘mission accomplished’ banner when there is so much work to be done — and so many Americans are still hurting,” Biden said in response. “More than 20 million Americans — one out of every seven U.S. workers — are still out of work.”

And, indeed, the jobless rate may even be 3 percentage points higher than indicated by Friday's report. In a note at the bottom, BLS says tens of thousands of workers may have been misclassified, listing themselves as absent from work for "other reasons" rather than laid off, and thereby being counted as employed.

"BLS and the Census Bureau are investigating why this misclassification error continues to occur and are taking additional steps to address the issue," the report said. The same was true of the March and April reports, putting those jobless rates more likely at 5.4% and 19.7%, respectively, rather than the reported 4.4% and 14.7%.

Cornell University’s Private Sector Job Quality Index indicated the vast majority of the jobs created last month (83.47%) were low quality, paying less than the mean weekly wage of $840.50. About half the new jobs were at food services and drinking establishments.

University of Chicago economist Austan Goolsbee, former chairman of the Council of Economic Advisers, said May's report was more like a "dead [cat] bounce."

William Rodgers and Andrew Stettner of the Century Foundation noted payrolls are down nearly 20 million from February’s level, with indications coming state and local government layoffs could swell unemployment rolls in the near-term. Civil unrest and a second wave of coronavirus infections also are complicating calculations.

“We are not ‘through the pandemic,’ as President Trump falsely claimed [Friday] morning. We are in its thralls. The nation needs to seize this moment and take the steps to create an inclusive recovery and economy. Without equal opportunity, there can be no justice,” they said in an email to International Business Times.

The BLS report noted Hispanic, African American and Asian unemployment was well above 13.3% and half of the nation’s veterans are unemployed.

While adding 2.5 million jobs is considered a good start, Tim Shaler, chief economist and adviser at iTrust Capital, described it as a “tiny dent” compared to the 42 million in initial unemployment claims that have been filed since mid-March. He said another round of economic stimulus still is needed to help the economy recover further.

University of Michigan economist Justin Wolfers illustrated the trend.

Wolfers also described Friday's stock market reaction to the report as overblown.

"If today's jobs numbers caused you to dramatically shift your assessment of the economy, you're doing it wrong. Markets are reacting to today's jobs report as if it were pretty good news, but it's far short of great news and that seems about right," he tweeted.

Robert Johnson, professor of finance at Heider College of Business at Creighton University, said in a response to an IBT query that a single month's report “does not constitute a trend” and it is unlikely all businesses forced to close at the start of the pandemic will reopen.

“I believe that the coronavirus recession will lead to more permanent job losses as businesses realize that they can effectively operate with a shrunken workforce,” he said.

Though Trump indicated he favors another round of stimulus, Senate Republicans have expressed reluctance to act quickly, and a vote may not take place before late July. House Democrats approved a $3 trillion package last month, but Senate Majority Leader Mitch McConnell declared it "dead on arrival." Both Republicans and the White House have indicated that $1 trillion is a more likely range for the next round of aid.

“The job losses in the government sector and especially the continued job losses for state and local government should, if anything, reinforce the need for state and local government relief. Perhaps this data will allow lawmakers to target aid, relief, and then potential stimulus for sectors that most need it in order to complement a recovery," said Tom Kozlik, head of municipal strategy and credit at Hilltop Securities.

Kozlik said a delay in aid to state and local governments, which have borne the brunt of coronavirus costs and been clamoring for federal aid, could have an adverse effect on credit ratings.