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In a stunning surprise, the economy added 2.5 million jobs last month

Economists say the recovery is happening faster than expected

Photo (c) tadamichi - Getty Images
In a report that turned conventional wisdom on its ear, the Labor Department says the economy actually added jobs in May after millions of people were laid off in April.

Total nonfarm payrolls increased by 2.5 million last month as the unemployment rate fell to 13.3 percent. Some Wall Street estimates put the May unemployment rate at 20 percent.

“These improvements in the labor market reflected a limited resumption of economic activity that had been curtailed in March and April due to the coronavirus (COVID-19) pandemic and efforts to contain it,” the Bureau of Labor Statistics said in a press release.

It was rehiring in leisure and hospitality businesses, devastated by quarantines across the country, that helped lead the unexpected resurgence. But there was also very heavy hiring in construction, education, health services, and retail trade. By contrast, employment in government continued to decline sharply.

Major surprise

Economist Joel Naroff of Naroff Economic Advisers says the May report was a major surprise, showing that the reopening of the economy is going a lot faster than expected.  

“The rise in payrolls and the decline in the unemployment rate indicate that the collapse in the economy brought on by the virus-related shutdowns is coming to an end,” Naroff told ConsumerAffairs. “Hopefully, that means we will be able to start moving forward and recoup the losses we saw during the shutdowns.”

Businesses in the leisure and hospitality sector led the way, increasing their payrolls by 1.2 million after slashing 7.5 million jobs in April and 743,000 in March. Bars and restaurants, which began to reopen in some states as early as late April, accounted for about half of the job gains.

Contractors go back to work

Construction hiring surged by 464,000 in May, gaining back almost half of April’s losses, with growth about equally split between the residential and nonresidential sectors. 

Education and health services added 424,000 jobs in May, after giving up 2.6 million in April. Health care employment increased by 312,000 over the month, with many of the gains in dentist offices and other health care practitioners.

Retail businesses, shut down during the height of the pandemic, also contributed to last month’s wave of hiring. Retail hiring rose by 368,000 after that sector shed 2.3 million jobs in April. Hiring was the greatest among clothing retailers, car dealers, and general merchandise stores.

At the same time, the pain continued for some types of retailers. Electronics and appliance stores and businesses selling auto parts and tires continued to lose employees.

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