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Surprise fall in US unemployment rate to 13.3 per cent

The US unemployment rate for May fell to 13.3 per cent, as the labour market added jobs, the Bureau of Labor Statistics (BLS) said on Friday, going against Wall Street expectations for a continued rise in job losses due to the coronavirus pandemic.

Washington, 5 June 2020 (dpa/MIA) – The US unemployment rate for May fell to 13.3 per cent, as the labour market added jobs, the Bureau of Labor Statistics (BLS) said on Friday, going against Wall Street expectations for a continued rise in job losses due to the coronavirus pandemic.

The decline comes off the previous month’s recorded rate of 14.7 per cent. The number of jobless fell by 2.1 million from last month to 21 million, the BLS said. The data was better for whites and Hispanics, but the black community showed little change.

The better-than-expected jobs data sent US markets higher at the open.

The S&P 500 index was up 2 per cent, while the Dow Jones Industrial Average was higher by 2.6 per cent in the initial minutes of trading. The tech-heavy Nasdaq moved up 0.75 per cent.

A lot of the job gains appeared to be people getting recalled to work, but the number of people who appear to have lost their jobs permanently rose.

The White House itself had cautioned unemployment could creep above 20 per cent before the labour market began to recover.

BLS noted that a chunk of workers were classified under its methodology as being absent from work, but not categorized on temporary leave. The agency noted that otherwise this could have put the unemployment rate 3 percentage points higher.

In trying to parse the data, analysts noted that the Payroll Protection Program, a major part of the congressional stimulus, may have been working. The scheme was was worth hundreds of billions of dollars and was designed to keep people in their jobs.

This raises questions about whether Congress will let the programme expire in the coming months, while expanded unemployment benefits are also set to end.

Employment rose “sharply” in leisure and hospitality, construction, education and health services, and retail trade, the BLS said. Government employment declined.

US President Donald Trump is hailing the jobs number and announced a press conference at the White House to talk about the labour market. On Twitter, Trump called the data “amazing.”

The question now hanging over the economy is whether the initial spike in payrolls can be sustained.

The coronavirus pandemic itself has not passed, even as states are reopening over the past weeks and business are hanging out their shingles again. There remain concerns about a potential resurgence of cases.

“The reopening of parts of the economy led to an immediate pick-up in hiring in May, with payrolls in the hardest-hit sectors rebounding fastest,” said economists at Capital Economics, while warning the jobless rate may remain elevated for years.

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