The shock US jobs data good news for the global economy, but the devil is in the detail
The monthly US jobs report is a crucial economic indicator that has the full attention of global markets. On Friday 5 June, markets were stunned when the US Bureau of Labour Statistics (BLS) announced the jobless rate fell in May to 13.3% from 14.7% in April, with 2.5 million jobs created. The real question is whether the world’s biggest economy is on the road to recovery.
Economists had expected the unemployment rate to rise to about 20%, a massive miscalculation that probably failed to account for the gradual reopening of parts of the US economy in May after many businesses shuttered in the face of the pandemic. Bloomberg columnist John Authors described it as “the single most surprising economic figure ever”.
Market reaction was predictable. The major trio of US stock indices all climbed more than 2% and are nearing record peaks again. On the JSE, the All-share and the Top-40 both advanced almost 3% and may be set for more gains on Monday.
One person who feigned no surprise was President Donald Trump, who is always quick to take the credit for US job creation.
“Really Big Jobs Report. Great going President Trump (kidding but true)!” Trump gleefully tweeted. Later, Trump crassly evoked George Floyd, the unarmed black man killed by a white Minneapolis police officer whose death has triggered a wave of anti-racism protests across America and around the world.
“Hopefully George is looking down right now and saying this a great thing that’s happening for our country. There’s a great day for him. It’s a great day for everybody. It’s a great day for everybody. There’s a great, great day in terms of equality,” Trump said, setting a new bar for tone-deafness.
Trump’s use of the word “equality” was revealing because if anything, the data — which has racial breakdowns — highlighted enduring inequalities. White unemployment in May fell to 10.7% from 12.4% in April, while black unemployment rose slightly to 16.8% from 16.7%. This surely suggests that job opportunities for black Americans remain relatively scarce, perhaps because their communities still lack comparable levels of investment or many of the jobs they held in the first place were insecure — a legacy of disparities that still persist in education. Trump has liked to boast about historically low black unemployment, a trend that began under Barack Obama, but it seems many of those jobs lacked a firm foundation. Many may not come back.
And for such double-digit unemployment numbers to be taken as “good news” is an indication of the scale of April’s meltdown, when more than 20 million Americans lost their jobs. In February 2020, the US unemployment rate was only 3.5%, and so the situation still looks fairly dire. It is also important to note where the added employment numbers come from.
“In May, employment in leisure and hospitality increased by 1.2 million, following losses of 7.5 million in April and 743,000 in March. Over the month, employment in food services and drinking places rose by 1.4 million, accounting for about half of the gain in total non-farm employment,” the BLS said.
So much of the work that sprouted in May as parts of the economy reopened were in the food and drinks sector, where the jobs are typically low wage and often part-time. Indeed, 40% of the new jobs in May were part-time.
Having said that, the fact that these kinds of jobs are being generated suggests that consumers and households with disposable income are spending again – there is clearly pent-up demand in the US economy as there is elsewhere, including South Africa as witnessed by the queues at bottle stores last week. And then there is a monstrous stimulus package of close to $3 trillion.
And there are other signs that the US economy is far from full throttle. Data on Friday also showed that Chinese exports in May declined over 3%. America, even amid various trade scraps between the two global economic giants, remains a key market for Chinese exports. The June jobs report will indicate if the employment uptick has been sustained. For now, it remains to be seen if the US recovery will take the shape of a V or some other letter or symbol. A checkmark, maybe, with a bounce that then stalls? BM