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Economy add 2.5 million jobs as businesses reopen

Economy add 2.5 million jobs as businesses reopen


Economy add 2.5 million jobs as businesses reopen

Paul Davidson
USA TODAYPublished 4:43 PM EDT Jun 5, 2020The economy unexpectedly gained 2.5 million jobs in May after record losses the prior month as states began allowing businesses shuttered by the coronavirus to reopen and many Americans returned to work.The unemployment rate fell to 13.3% from April’s 14.7%, which was the highest since the Great Depression.The monthly increase — the largest ever — defied expectations. Economists surveyed by Bloomberg had predicted that eight million jobs would be shed last month following 20.7 million losses in April.”The biggest payroll surprise in history, by a gigantic margin, likely is due to a wave of hidden rehiring,” says Ian Shepherdson, chief economist of Pantheon Macroeconomics.Stocks jumped on the news. In early afternoon trading, the Dow Jones industrial average rallied almost 1,000 points, or 4%, while the broader Standard & Poor’s 500 jumped 87 points, or 3%.President Donald Trump on Friday cast the surprisingly strong jobs numbers as a sign the U.S. economy is poised for major comeback.    “This is a rocket ship,” Trump said. “We made a big step in our comeback.”J.C. Penney closings: J.C. Penney store closings list released: Is your local store facing liquidation in bankruptcy?Stocks soar: Stocks extend rally after surprise May job gainsUnemployment to remain elevatedThe report shows that state reopenings triggered a swifter rebound than anticipated from the deepest recession in history. Many economists had expected a partial reversal of historic job losses since March to begin in June. But the earlier revival hasn’t changed economists’ views that the downturn could leave deep scars: an unemployment rate that will remain elevated even after a robust rebound in the second half of 2020 and damage that lingers for years. May’s startling increase in payrolls upended virtually every economist’s predictions for another month of massive losses. Although states have started letting businesses gradually reopen in phases, the Labor Department’s survey was conducted in mid-May, relatively early in that process.And Labor on Thursday said about 20.1 million Americans were receiving unemployment checks during the week ending May 16. To be sure, not all of those getting benefits are unemployed. Some were on furlough or temporary layoff while others endured reduced hours.One hint that the labor market would turn around swiftly was that about 90% of those who were unemployed in April said they were on temporary layoff. In May, the number of people on temporary layoff fell by 2.7 million to 15.3 million. Meanwhile, the ranks of those who permanently lost jobs increased by 295,000 to 2.3 million.Restaurant plans more hiringIn Arlington, Virginia, the Celtic House Irish Pub & Restaurant was allowed to add outdoor dining to its takeout service a week ago, bumping up sales 5% but still leaving them about 70% below pre-pandemic levels, says co-owner Michael McMahon.In about a week, McMahon expects to reopen his 137-seat dining room at 50% capacity, increasing revenue to about 60% of normal. McMahon, who kept 20 of his 26 employees as a result of a forgivable federal loan, plans to hire another three or four workers to handle the indoor table service and the additional coronavirus-related cleaning that move will require.McMahon is roughly breaking even and doesn’t expect to return to profitability until the restaurant can fully reopen and a vaccine is available next year, making patrons feel comfortable enough to freely dine out again.“I don’t think there’s any sign we’re going back to normal,” he says. But he adds, “We have to keep going. We can’t just close the doors.”Although 9.3 million workers lost jobs in May, 13.1 million went back to work, according to an analysis of Labor Department data by Morgan Stanley. Restaurants, stores and other non-essential businesses that states shut down to minimize contagion from the virus are reopening in phases across the country. Nonfarm payroll gains by industryIn May, nearly every industry partly reversed the prior month’s huge losses. Leisure and hospitality, the sector hardest hit by the pandemic, gained 1.2 million jobs following 7.5 million losses the prior month. Retail added 368,000 following 2.3 million losses.Construction added 464,000 jobs, recovering about half of the positions shed in April. Manufacturing added 225,000 jobs following 1.3 million losses. Healthcare added 312,000 as many physician and dental offices reopened.And professional and business services added 127,000 jobs after 2.2 million losses.Some economists are optimistic that the report heralds a sharper rebound than anticipated in coming months. An encouraging sign is that 73% of unemployed people in May said they were on temporary layoff.“It seems likely that a large share of the unemployed will be able to go back to their jobs,” says Dean Baker, cofounder of the Center for Economic and Policy Research.Cautious response to jobs reportOthers are more cautious.Although the big jobs rebound began a month earlier than expected, the labor market and economy still face a long and grueling road to recovery. The economy shed 22.1 million jobs in March and April after Labor revised up the losses by 642,000 Friday, wiping out nearly all of the gains since the Great Recession of 2007-09.At least some of the surprising rebound in May can be traced to a federal program that provides small businesses with loans that are forgivable as long as they retain or rehire staffers, even if many aren’t actually working, says economist Sophia Koropeckyj of Moody’s Analytics.Some of those job gains may not be lasting, she says. “Many businesses will fail,” she says. “We have already seen a spike in business bankruptcies.”Economist Diane Swonk of Grant Thornton says COVID-19 cases and hospitalizations have picked up since many restaurants reopened and rehired employees for Memorial Day. That, she says, “could deal another blow to restaurants and bars down the road.”Tech and protests: Want to participate in a protest? You may want to do this with your tech before you goOxford Economics expects a strong bounce-back the second half of the year as businesses continue to reopen but it reckons the economy will recoup only about 60% of the jobs lost by year’s end, leaving unemployment close to 10%. With consumers wary of visiting restaurants and other gathering spots, “A full recovery will not occur in earnest until a vaccine is widely available by the second half of 2021,” Koropeckyj says. And she doesn’t expect employment to return to pre-pandemic levels until late 2022.“It’ll be a long time before the labor market is anywhere near back to its pre-virus state,” says economist Michael Pierce of Capital Economics.Many Americans who lost jobs permanently are struggling despite trillions of dollars in government aid.Unemployment benefits still delayedMolly Lynch, 32, of Las Vegas, lost her job as a regional coordinator for Sen. Bernie Sanders’ presidential campaign in late February because of the coronavirus. Shortly after, the pandemic wiped out her boyfriend Augustus Fink’s warehouse job.Fink filed for unemployment benefits a couple of months ago but still hasn’t received any payments. He has applied for hundreds of jobs to no avail.The couple hasn’t been able to pay rent or utility bills for several months and relies on food stamps for groceries. Lynch’s mother, who lives with the couple, used her Social Security benefits to pay her daughter’s car insurance. Fink’s $1,200 government stimulus check is helping cover their cellphone bills.“It’s pretty terrifying,” Lynch says, noting the couple have a four-year-old daughter and another child on the way. “I don’t want (her daughter) to be scared. This has never happened in my lifetime.”Now that Las Vegas beauty salons have reopened, Lynch wants to get a job as a cosmetologist but she can’t afford to renew her license. She’s hoping to land a receptionist job at a salon so she can pay the renewal fee and become a cosmetologist, allowing the couple to start digging out of their financial hole. Jobs report shows labor force participation risesIn May, the share of Americans working or looking for jobs — which together make up the labor force – rose from 60.2%, lowest since 1973, to a still depressed 60.8%. That’s good news because it means unemployment fell even as more people on the sidelines began looking for work.Many people who lost jobs didn’t look for work because of fears of catching the virus while job hunting, caring for sick relatives or watching kids who were home now that schools are closed. Also, with much of the economy shuttered, few were jobs available and many workers expected to be recalled by their employers as the pandemic eased.Broader jobless measure dropsWhile the unemployment rate fell, a broader measure of joblessness also edged down. That gauge – which includes Americans working part-time even though they want full-time jobs, discouraged workers who have stopped looking and the unemployed – declined from 22.8% to 21.2%.

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