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Friday was a banner day in the stock market after investors reacted to an unexpectedly positive May jobs report. The report defied expectations, spurring a significant rally in the markets and offering hope to millions of Americans struggling during these unprecedented times.
Behind the Numbers: Heading into the release of the report, many experts were predicting job losses in the amount of nearly eight million with unemployment reaching levels as high as 20%. Instead, the report demonstrated how the economy added 2.5 million jobs over the month of May. That figure represents the best month for job growth since the Bureau of Labor Statistics began keeping track of this information in 1939. Total unemployment rates dropped from April’s high of 14.7% to 13.3%, signaling that the economic recovery may be sooner than expected.
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Market Reaction: The markets were one of the biggest beneficiaries of these strong numbers. The Dow gained almost 830 points, finishing the day up 3.2%. The S&P 500 gained 2.6% while the Nasdaq was up over 2% for the day. In addition to technology stocks soaring on the news, Boeing also gained 11% as airlines continue to express their plans to add more flights back into the schedule this summer. For the week, the Dow closed up almost 7%, the S&P 500 rose nearly 5%, and the Nasdaq boasted gains of 3.4%. All of these numbers paint an optimistic picture heading into the summer as the economy continues to gain steam and try to reverse the damage inflicted by the COVID-19 shutdown.
What Fueled the Employment Boost: Economists credit a number of factors for the positive report. In late March, the federal government enacted a host of legislation to boost the economic recovery. Included in this package was a stimulus check for the majority of American adults signed by President Trump. Also in the package was the Payroll Protection Plan, designed to provide small businesses with the resources to be able to give a regular paycheck to their workers during this time.
Big Winners: Not surprisingly, the job recovery was led by the restaurant and bar industry, accounting for roughly half of the gains. The healthcare industry also enjoyed big gains, with dental care leading the way with the addition of over 244,000 positions. It is no surprise that healthcare saw a big rebound as more and more elective procedures were added back. Similarly, the construction sector saw 464,000 new positions as this service was one of the first reopen in May. Retail and education were also winners for the month. Conversely, the government sector continues to suffer, with positions declining by 585,000 in May.
Demographic Breakdown: When looking at the demographics of the data, it is clear that the white population is benefitting the most from the stronger than expected numbers. The unemployment rate for white workers dropped to 12.4%. Conversely, the unemployment rate for black Americans remained largely unchanged from April at 16.7%, indicating that they are not entering the workforce again with the same strength as their white counterparts. In addition, the gender differences showed the unemployment rate for adult women at a level of 13.9% in May, compared with the 11.6% rate for adult men. This is largely the result of women taking up a larger presence in industries such as hospitality.
Even if the individual finances of your family have not yet recovered from the massive economic shutdown, the numbers out of this latest employment report should provide a dose of optimism. While it is a long road ahead, adding more work is certainly a step in the right direction as the country begins to spring back to life. It is important to exercise caution when reading into these numbers. With no playbook to follow, it is challenging for financial experts to predict how the economy will rebound after a health crisis of such magnitude.
