US nonfarm payrolls rose by 2.5 million in May, more than double the largest monthly increase going back to 1939, which was 1.1 million in September 1983.
Once again, the number of unemployed persons reported as a temporary layoff was 15.3 million in May, while permanent job losses were 2.3 million. That equals 87% that were temporarily furloughed.
March and April were significantly worse than previously reported. Downward revisions to the prior two months sliced off 642,000 jobs from the previously reported totals. The March tally was revised down to -1.4 million from -881,000, and the April figure was revised down to -20.7 million from -20.5 million.
Labor Force and Unemployment
The unemployment rate declined by 1.4 percentage points to 13.3% in May from 14.7% in April. The all-in unemployment rate (U-6) also slipped, down 1.6 percentage points to 21.2% in May. The labor force added 1.75 million workers, pushing the total workforce up to 158.2 million. The labor force participation rate rebounded to 60.8% in May from 60.2% in April.
Service-providing industries added 2.4 million workers, while goods producers added 669,000 workers. Only three segments had job losses in May. The increases were broad based, although the leisure & hospitality segment was nearly half of the May gains.
Other services, which is not one of the 10 major segments, added a notable 272,000 workers. The subindustry detail is reported on a one-month lag, so the source of the hiring is unclear. We suspect that the bulk of the gains were within personal and laundry services, which includes hair/barber/nail/skin care establishments. That segment lost 785,100 jobs in April alone.
Conversely, government had sharp declines in May, as all three levels (federal/state/local) sustained job losses. Roughly 84% of the positions, or 487,000, were on the local level. Similar to April, 64% of the local-level jobs cut were educational positions.
Our near-term outlook has dramatically improved based on the detail within this report. Again, much of the losses remain categorized as temporary furloughs and are largely confined within services. As the May rebound in leisure & hospitality and retailers show, most of these workers should return to work rather quickly as activities resume.
Yet, the unstoppable typical recessionary forces—highlighted by permanent job losses in the millions, bankruptcies and corporate restructurings—have damaged the US economy. These will be painful, have broader ramifications than just those directly involved and will not easily be repaired. Like most recessionary recoveries, the coming recovery will be measured in quarters and years, especially on the employment front. The devastation is brutal to witness.
Still, among the primary reasons for our optimism is the massive size of the assistance programs by the federal government, with a large income replacement component for individuals and businesses, and herculean efforts by the Federal Reserve to assist proper market function. Combined, these programs appear to be blunting some of the downside and are hastening the recovery.
Lastly, it is important to note that this report was a snapshot of the employment situation as of the second week in May (May 11 to 15), when most of the US was still under state-level, stay-at-home orders. Now roughly three weeks later, all 50 states are in varying phases of reopening.
This a very different sort of recession, compressed into a tighter timeline than normal. While we are very encouraged by the strong May job gains, our enthusiasm is tempered considerably by the 2.3 million permanent job losses. And, sadly, there will be more permanent job cuts.
Nonetheless, the bulk of the job losses appear to be in the rearview mirror. We anticipate that the myriad of government support programs is helping many individuals and businesses get through this episode. Moreover, we believe a self-reinforcing upswing has begun, whereby the restarting of some activities will cause many of these furloughed workers to be recalled in the coming months. In turn, those workers will have income to spend. There will most certainly be some bumps in the path forward, but the repairing of the economy is well underway.
This material was provided by SunTrust Private Wealth Management for use by BB&T Wealth.
Advisory managed account programs entail risks, including possible loss of principal and may not be suitable for all investors. Please speak to your advisor to request a firm brochure which includes program details, including risks, fees and expenses.
BB&T Wealth is a marketing name used by Truist Financial Corporation and the following affiliates: Banking products and services, including loans and deposit accounts, are provided by SunTrust Bank and Branch Banking and Trust Company, both now Truist Bank, Member FDIC. Trust and investment management services are provided by SunTrust Bank and Branch Banking and Trust Company, both now Truist Bank and SunTrust Delaware Trust Company. Securities, brokerage accounts and /or insurance (including annuities) are offered by SunTrust Investment Services, Inc., BB&T Securities, LLC, and P.J. Robb Variable Corp., which are SEC registered broker-dealers, members FINRA, SIPC, and a licensed insurance agency where applicable. Investment advisory services are offered by SunTrust Advisory Services, Inc., GFO Advisory Services, LLC, BB&T Securities, LLC, Sterling Capital Management, LLC, Precept Advisory Group, LLC, and BB&T Institutional Investment Advisors, Inc., each SEC registered investment advisers. BB&T Sterling Advisors, BB&T Investments and BB&T Scott & Stringfellow are divisions of BB&T Securities, LLC. Mutual fund products are advised by Sterling Capital Management, LLC.
While this information is believed to be accurate, SunTrust Banks, Inc., now Truist Financial Corporation, including its affiliates, does not guarantee the accuracy, completeness or timeliness of, or otherwise endorse these analyses or market data.
The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but Truist Financial Corporation makes no representation or guarantee as to their timeliness, accuracy or completeness or for their fitness for any particular purpose. The information contained herein does not purport to be a complete analysis of any security, company, or industry involved. This material is not to be construed as an offer to sell or a solicitation of an offer to buy any security.
Opinions and information expressed herein are subject to change without notice. STIS and/or its affiliates, including your Advisor, may have issued materials that are inconsistent with or may reach different conclusions than those represented in this commentary, and all opinions and information are believed to be reflective of judgments and opinions as of the date that material was originally published. STIS is under no obligation to ensure that other materials are brought to the attention of any recipient of this commentary.
Comments regarding tax implications are informational only. Truist and its representatives do not provide tax or legal advice. You should consult your individual tax or legal professional before taking any action that may have tax or legal consequences.
Investments involve risk and an investor may incur either profits or losses. Past performance should not be taken as an indication or guarantee of future performance.
STIS/STAS shall accept no liability for any loss arising from the use of this material, nor shall STIS/STAS treat any recipient of this material as a customer or client simply by virtue of the receipt of this material.
The information herein is for persons residing in the United States of America only and is not intended for any person in any other jurisdiction.
Investors may be prohibited in certain states from purchasing some over-the-counter securities mentioned herein.
The information contained in this material is produced and copyrighted by Truist Financial Corporation and any unauthorized use, duplication, redistribution or disclosure is prohibited by law.
STIS/STAS’s officers, employees, agents and/or affiliates may have positions in securities, options, rights, or warrants mentioned or discussed in this material.
Asset classes are represented by the following indexes. An investment cannot be made directly into an index.
S&P 500 Index is comprised of 500 widely-held securities considered to be representative of the stock market in general.
©2020 Truist Financial Corporation. BB&T, SunTrust®, the SunTrust logo, and Truist are service marks of Truist Financial Corporation. All rights reserved.