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Unemployment fell to 13.3 percent in May, with a gain of 2.5 million jobs.
The job market unexpectedly reversed its free fall in May as employers brought back millions of workers after pandemic-induced layoffs and the unemployment rate declined.
Tens of millions remain out of work, and the unemployment rate, which fell to 13.3 percent from 14.7 percent in April, remains higher than in any previous postwar recession.
But employers added 2.5 million jobs in May, the Labor Department said Friday, defying economists’ expectations of further losses and offering hope that the rebound from the pandemic-induced economic crisis could be faster than forecast.
Still, job openings remain far below normal, and the trillions of dollars in government assistance that have helped keep the economy on life support may be nearing their end.
The report noted that “employment rose sharply in leisure and hospitality, construction, education and health services, and retail trade,” even as jobs in the government continued their decline.
“What this is telling us is that at least part of the pain in April was due to people being laid off or furloughed who still had very strong connections to their employers,” Ernie Tedeschi, an economist at Evercore ISI in Washington, said. “As good and surprising as this report was, this may just be the low-hanging fruit. These may have been the easiest workers to bring back.”
Stocks surge as jobs report defies expectations. The Nasdaq is just shy of a record.
Stocks on Wall Street shot higher on Friday, with the S&P 500 coming close to recouping all of its losses for 2020 so far, after the federal government reported a surprising pickup in hiring in May.
The S&P 500 rose more than 2 percent. The index is now about 1 percent below where it started the year, and less than 6 percent away from its high point in February.
Another major Wall Street index, the tech-heavy Nasdaq composite, closed just short of a record. Large technology companies like Amazon, Apple and Microsoft have fared relatively well lately. Tech companies are seen as protected from any economic downturn because of their sheer size and enormous cash stockpiles, and also because the nature of the coronavirus-related lockdowns — with workers at home and consumers dependent on e-commerce — played directly to their strengths.
Stocks were already poised to rise before the government reported that employers added 2.5 million jobs in May, but the news sent share prices sharply higher. Economists had expected the government to report that eight million jobs had been lost during the month.
“These much better than expected results suggest that the U.S. economy may be more resilient than many investors and analysts feared,” wrote John Stoltzfus, chief investment strategist, at Oppenheimer Asset Management.
The rally rippled through other markets as well. Oil prices also surged, as did yields on U.S. Treasury bonds, suggesting the jobs numbers delivered an unexpected jolt of economic optimism to investors.
Oil prices were also strengthened by the expectation that the Organization of the Petroleum Exporting Countries, Russia and other producers will agree on Saturday to extend production cuts through July. These countries originally agreed on April 12 to trim production by a combined 9.7 million barrels a day, or about 10 percent of global supplies in normal times. Production was supposed to begin rising gradually after June.
The producers are expected to meet by videoconference to agree on the extension and other matters, analysts said. OPEC has not yet confirmed that the meeting will occur.
Energy, financial and industrial stocks led the day’s gains. Airlines and cruise companies and — which had been battered by the coronavirus crisis and economic turndown — soared. Defensive stocks that had outperformed during the peak of the outbreak — such as Campbell Soup and Clorox — declined.
Financial markets have been on an upward trajectory for weeks as investors have responded to signs around the world that businesses were slowly but steadily returning to normal and policymakers pumped money into the economy and financial markets.
Since March 23, when the market bottomed after the Federal Reserve signaled its willingness to pump unlimited amounts of liquidity into financial markets to stabilize key bond markets that were then malfunctioning, the stock market has risen more than 40 percent.
The rehiring bonanza at restaurants helped to lift payrolls.
Restaurants and bars, health care employers and construction were among the sectors that drove the May job market improvement, based on the Labor Department’s report.
About 1.4 million people gained or took back their restaurant jobs, even as hotels continued to shed workers. About 460,000 were hired or rehired in construction, 370,000 in retail, and 390,000 in health care and social assistance. That latter boost came heavily from dentist’s offices, which took back some 245,000 workers.
The data tells the story of an employment rebound as the state and local economies began to reopen and Paycheck Protection Program checks went out, spurring rehiring and bringing workers back onto payrolls.
“The economy is still being very much buffered by stimulus,” said Michelle Meyer, head of U.S. economics at Bank of America. “When that starts to wane, we will learn a lot more about the underlying health of the recovery.”
Ms. Meyer noted that more than half of the job gains in May — 1.4 million — were in restaurants and bars, many of which probably received assistance under the government’s Paycheck Protection Program. The report on Friday suggests that the program, along with other elements of the government’s response, helped offset at least some of the economic damage.
Joseph Biden criticizes President Trump’s handling of the economy.
Former Vice President Joseph R. Biden Jr. on Friday laced into President Trump’s stewardship of the economy, arguing that even as a new jobs report showed moderate and unexpected gains, Mr. Trump should be held to account for deepening the nation’s staggering and unequal economic pain.
Mr. Biden, the presumptive Democratic presidential nominee, delivered the speech at Delaware State University, a historically black university in Dover, Del., just hours after a jobs report showed unemployment falling to 13.3 percent in May from 14.7 in April, as the economy added some 2.5 million jobs.
Republicans hope to run on a message of economic comeback, and Mr. Biden said that he was “proud of” and “so happy” for the Americans who had found work. But it was far too soon, he warned, to declare the economic crisis over, noting that black unemployment had risen even as the numbers declined over all.
“It’s time for him to step out of his own bunker,” Mr. Biden said of the president, suggesting that Mr. Trump was prematurely seeking to declare, “Mission Accomplished.” “A president who takes no responsibility for costing millions and millions of Americans their jobs deserves no credit when a fraction of them return.”
Mr. Biden’s remarks came as the country reeled from unrest surrounding issues of race and police violence, following the killing last week of George Floyd, an unarmed black man, by a white police officer.
Promoting the economic news on Friday and also lauding the National Guard for handling protests in Minnesota, Mr. Trump referenced Mr. Floyd, saying this is “a great day for him, it’s a great day for everybody.”
Mr. Biden called those remarks “despicable.”
Consider the economic pain that the unemployment rate leaves out.
The 13.3 percent unemployment rate doesn’t tell the whole unemployment story. That is true even in ordinary times, and more so in view of the pandemic’s effect on the labor market, which has made this figure particularly incomplete as a measure of economic hardship.
The headline unemployment rate is calculated by taking the number of unemployed adults divided by the total number of people in the labor force, employed and unemployed.
But there are millions of people who are not working and want a job that this rate leaves out, including those part-time because their hours were cut, as well as those not looking for work because of fears about getting sick or responsibilities like caring for children.
Combining these and other groups results in a 27 percent expanded unemployment rate, which could more closely reflect the share of the labor force whose employment has been negatively affected by the pandemic.
How a tax benefit for developers could backfire in the pandemic.
Something remarkable is percolating in the commercial real estate market: Investors may end up losing millions in tax savings on gains from the sale of their properties because of the coronavirus pandemic.
Like-kind real estate exchanges, also known as 1031 exchanges (after the provision in the Internal Revenue Code), allow investors to sell a commercial property and pay no tax on the gains as long as the money from that sale is reinvested in other real estate. It could be a similar building, land or even air rights.
To reap the benefit, real estate investors need to identify a replacement property 45 days after the sale of the original property and close on the purchase within 180 days. If the criteria are met, the investors can defer taxes on the gains from the sale of the property. The deferral can extend until the investor’s death, at which point the capital gains tax is wiped out.
If the criteria are not met, the investors face not only an enormous tax bill for the gains but additional taxes for deductions taken while they owned the building. That can amount to millions of dollars for some properties.
As lockdowns complicated closing deals, the real estate industry lobbied the Treasury Department to get extensions on those dates. But once the relief was granted, deals began to fall apart.
Home prices are rising, along with post-lockdown demand.
Mortgage rates may be appealingly low, but people shopping for a new home this spring face a challenging market.
Demand, which was pent up during coronavirus stay-at-home orders, and a dearth of homes for sale are keeping prices high and setting off bidding wars in some areas as states continue to reopen for business. Some buyers may also find it tougher to qualify for mortgages, as lenders require higher credit scores and bigger down payments in response to higher unemployment and economic uncertainty in the pandemic.
Nationally, the median price for a home, excluding new construction, was about $287,000 in April, up more than 7 percent from a year earlier, the National Association of Realtors reported.
Now, with many states lifting restrictions on home tours, the housing market is reawakening. Shoppers are feeling more comfortable visiting properties: About two-thirds of people who attended an open house within the past year said they would attend an open house now “without hesitation,” a separate survey from the Realtors association found.
But some sellers remain cautious. They want to show homes by appointment only, and they want offers from serious buyers who have been preapproved for financing, said Lawrence Yun, chief economist with the association. “They don’t want casual shoppers,” he said.
Unemployment for black workers continued to rise.
Unemployment for Hispanic workers and white workers dropped sharply in May, while the jobless rate for black adults remained high.
Joblessness for white adults fell to 12.4 percent from 14.2 percent the prior month, and Hispanic worker unemployment declined to 17.6 percent from 18.9 percent. For black workers, however, joblessness was up slightly to 16.8 percent, and unemployment for Asians also increased, to 15 percent from 14.5 percent.
Construction and leisure and hospitality, sectors where Hispanic workers are heavily represented, rebounded sharply in May. It is too soon to tell with just one month of data, but it could also reflect the beginning of a common recession pattern: job losses for black workers often continue even as the tide turns and white workers in particular begin to return to work.
Black workers did recoup some jobs, but not enough to offset the increase in the number of adults applying for employment. The employment-to-population ratio for black workers ticked up to 49.6 percent, up from 48.8 percent the prior month. Still, that means that less than half of black adults are working — worse than any other large racial or ethnic group.
Catch up: Here’s what else is happening.
An aviation dispute between the Trump administration and China appears to be softening, with the United States on Friday saying it will allow Chinese carriers to collectively operate two weekly round-trip flights to the United States. The announcement comes two days after the Transportation Department said it would ban all such flights in response to a similar ban on American passenger flights to and from China. After the department made that announcement, the Chinese government said it would allow two American airlines to operate weekly flights, paving the way for the reversal on Friday.
Gap, one of the biggest U.S. retailers with its namesake, Old Navy and Banana Republic chains, said on Thursday that net sales in the first quarter plummeted 43 percent to $2.1 billion and that it posted a net loss of $932 million. The company, which has nearly 2,800 stores in North America, said that it had reopened more than 1,500 locations and expected the “vast majority” of stores to be open by the end of June.
Slack, the business communication platform, said in a regulatory filing that its first-quarter revenue rose 50 percent to $201.7 million and a small loss compared with the same period last year. But the results disappointed investors, who expected greater growth during the pandemic, and its shares plunged.
Reporting was contributed by Ann Carrns, Matt Phillips, Paul Sullivan, Katie Glueck, Astead W. Herndon, Alicia Parlapiano, Niraj Chokshi, Conor Dougherty, Peter Eavis, Ben Casselman, Anupreeta Das, Peter Eavis, Vanessa Friedman, Mohammed Hadi, Sapna Maheshwari, Gregory Schmidt, Carlos Tejada and Kevin Granville.
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