The unemployment rate for May has shocked experts by dropping to 13.2% instead of rising to 19% as forecasted.
The economy added 2.5 million jobs in May as states began to reopen and some people were able to go back to work at jobs that had been affected by shutdowns that closed many businesses states considered non-essential.
The one-month spike in hiring was one of the largest in U.S. history. April’s unemployment rate had been 14.7% with the loss of about 30 million jobs because of a global pandemic that made the majority of states go into shutdown mode in mid-to-late March.
Those who could work at home were encouraged or mandated to do so, and those who couldn’t were laid off or furloughed until conditions improved.
Lengthy shutdowns cost jobs
Shutdowns that were originally intended to last only a few weeks instead went on for at least six, and some states or parts of states were shut down for 12 weeks or more. Hardest-hit areas like New York City and parts of New Jersey are still under shutdown, and many states still face restrictions that have prevented millions from returning to work.
All 50 states at least partially reopened in May, however, and most of the added jobs are being attributed by the Bureau of Labor Statistics to people who temporarily lost their jobs returning to work, a total of 2.7 million.
Bars and restaurants are the biggest area of regained jobs, with 1.4 million workers returning to work. Other big areas of gains included 464,000 in construction, another 368,000 in retail, and 225,000 in manufacturing.
312,000 health care workers also went back to work in May after being furloughed from non-emergency care positions that were emptied out to make way for COVID-19 patients that in most cases never materialized.
Still in deep recession
“The idea you would see job gains and the unemployment rate falling was not something really that people were expecting,” Brookings Institution economist Jay Shambaugh said. “But a 13.3 percent unemployment rate is higher than any point in the Great Recession. It represents massive joblessness and economic pain. You need a lot of months of gains around this level to get back to the kind of jobs totals we used to have.”
Many aspects of the economy are still in deep decline. Air travel was down about 80% from pre-COVID numbers, and nearly 50% of businesses did not pay their commercial rent in May.
In addition, a crash in oil prices has caused several major oil and gas drillers to file for bankruptcy along with a number of major retail chains including J. Crew, J.C. Penney, and Pier One, which says it will close all stores permanently.
According to the Washington Post, 100,000 small businesses have already closed permanently because of coronavirus shutdowns, which is about two percent of the 30 million small businesses in the country. FEMA reports that 40% of businesses that experience a disaster will fail within a year.