May’s Surprising Jobs Report Has Economists, Wall Street Celebrating

( It seems that most economists were wrong after all — and they’re all very happy that they were.

On Friday, the U.S. Bureau of Labor Statistics released its May jobs report, which showed that more than 2 million people got jobs, and the unemployment rate actually improved to 13.5%. That is a far cry from the pundits who believed the unemployment rate would soar above 20% with millions of more jobs lost.

The payroll increase for May of 2.5 million was actually the largest on record. That’s a stark contrast from Wall Street’s general prediction of another 8.3 million jobs lost.

While we’re far from being out of the woods yet, the jobs report data does at least show what many had been hoping would prove true — that a lot of the lost jobs were just temporary, and they’d come back once states began re-opening.

A good indication of where the job market actually stands will come next month or even in July. That’s because many of the most populous states were still on lockdown when this data was reported (and many still are at least somewhat). It’ll also be telling whether more jobs are recovered in the coming months — which would signal the re-establishment of temporary jobs losses — or if those jobs are gone for good.

For now, though, economists are taking the data from May’s jobs report as a positive sign that better things are still to come. As the head of global markets at Citizens Bank, Tony Bedikian, said:

“Barring a second surge of COVID-19, the overall U.S. economy may have turned a corner.”

In a note sent out on Friday, Mike Gapen, an economist at Barclays Capital, said there’s a level of optimism about consumers, which could lead to “a solid recovery in the third quarter.”

And the chief investment officer of private wealth at Glenmede, Jason Pride, said:

“The recovery process appears to have begun in many areas across the country. As businesses re-open, they will naturally bring employees back.”

Data points show that retail sales, fuel sales, mortgage applications for purchase, new business applications and rail traffic have all increased over the last month, as have auto sales. In one month’s time, roughly 19% of economic activity in the U.S. that was lost as a result of the coronavirus pandemic has “come back on line,” according to a Glenmede report.

Wall Street pundits are celebrating May’s jobs report, saying it is only a confirmation that the surge in the stock market of late was for good reason, and not just smoke and mirrors.

Edward Yardeni, president of Yardeni Research, said:

“The market has been a ray of sunshine — basically investors convinced that we’ll get out of this, and the economy will recover along with earnings. So far, that forecast seems to be working out pretty well. The economy may very well be catching up with the stock market rather than the stock market going off on its own.”