May Jobs Report Surprises With 2.5 Million Jobs Added

May 2020 Jobs Report

The street was somehow expecting a further loss of 7.5 million jobs in May, to go along with the 23 million we lost in March and April. We instead added 2.5 million this time.

May’s jobs report should not really have been the surprise that it turned out to be. We’re not sure where we got the data that instead told us we’d be losing another 7.5 million jobs this time around, but no matter the methodology, stepping back and viewing the numbers from the perspective of common sense should have been part of the process.

There is a cause and effect with this particular hit to the jobs market that is remarkably transparent compared to any other job loss cycle we’ve had in history. This time it was done on purpose, like locking the doors to our shop and then seeing the line in the parking lot grow. When we open the door, we should not be surprised at all that the line to get in gets shorter.

While this is called the May jobs report, these reports run mid-month to mid-month, and therefore the survey encompasses the period between mid-April and mid-May. In the period prior, the April report, this represented the brunt of the effects of the shutdown on the job market, where we found 20.6 of the 23 million jobs that have been lost during the lockdown to date, with 1.4 million occurring in the prior period in the March report.

This makes perfect sense given that the period covered by the April report was the time that the doors became locked and all these people were sent home to shelter in place in the unemployment line. The May report included 2 weeks where people were being kept at home, but the mass exodus had already occurred, and during this time, we did not expect growth, but the contraction as virtually over at that point, where the lockdown was in full force during this period.

The second half of this report involved a time where we did start to re-open things and see many people who have been kept out of work by state decree being allowed to return to work again. While this wasn’t just a matter of governors raising their mighty hands and beckoning everyone back to work, as the re-opening strategies have been more gradual than this, but we have to wonder why they thought this would all result in a further contraction of jobs at all, let alone give up a further 7.5 million?

The addition of 2.5 million jobs that we saw with this report makes perfect sense actually. We should have never doubted that we would add some, and this still represents only a little over 1 in 10 jobs returning so far. We re-opened the economy at least somewhat though, so we should not have been surprised, let alone shocked, that we did see a little comeback here on the jobs front.

None of this happens without the participation of consumers though, and while there still remains a reluctance to resume normal activity, it’s not that everyone is so reluctant that they wish to stay away to the same extent that they were forced to. Vice President Pence shared that at the time of this report, it is estimated that 50% of small businesses re-opened, a number that has grown to 80% in the three weeks since.

This in itself should tell us that the number of jobs should have gone up, not down. This also tells us that we are trending in the right direction since, but we could have gathered all this by just looking at the lifting of restrictions that we’ve seen lately. We still have a long way to go to fully re-open, with several major states like New York and California well lagging in their efforts to return to normal, but the way that we have turned the corner will of course add more jobs as we progress.

Politicians such as Mike Pence and Donald Trump are of course taking up to take credit for this, and Trump is going even further than this, telling us now that his efforts somehow has kept the death toll down to the roughly 100,000 that we’ve seen so far, versus the millions of lives he has saved from the lockdown.

The lockdown wasn’t even his idea, and in spite of his being significantly opposed to it all along, saying that the U.S. wasn’t meant to be locked down right from the outset, and saw the idea of millions of Americans dying from this outbreak as ridiculous, somehow he has saved us from all these millions of extra people dying.

Trump even referenced the experience of Sweden, and described the situation there as dire somehow, presenting this as some sort of evidence of how many millions more Americans would have died if we did not shut the economy down like we did. Sweden isn’t being overrun by this though, and their death toll peaked back in April, in spite of their never locking down, and have been in decline ever since.

Ironically, Sweden has served as a valuable example of what happens when we do not force businesses to shut down and try to impose mass quarantining, and what they told us is that we need not fear these drastic predictions essentially based upon nothing. Trump does show us how uninformed he actually is when he revisits this prediction of millions of deaths that aren’t even being taken seriously anymore by those whose job appears to be to try to scare us as much as possible.

There has not been any evidence to suggest that this lockdown helped at all though, but none was needed apparently when all you have to do is speak glibly about the matter, as even Trump is now, and no one asks for the evidence for this or even asks any questions at all. However, if you can score some cheap points, looking to capitalize on myths can indeed be seen as an opportunity.

He remains enthusiastic about re-opening the economy, and may not even realize that his trying to pump up the effectiveness of the lockdown can only serve to make people more reluctant to proceed, which would clearly be counter to his ambitions in spite of his new rhetoric. We are proceeding anyway though.

It Only Took a Little Sensibility to Expose All Our Exaggerations About This Pandemic

It is not that we did not have evidence of this not happening right within our borders though, as we did not see a wave of death in the few states that remained opened. Hardly anyone referenced this though and it was even seen as taboo, as how dare people look to rain on our parade of paranoia by pointing out facts.

These people told us we’d be sorry and we should wait far longer, until there is a vaccine in some cases, even though the damage that has occurred already may already be as bad as we can handle, and if we let this bring down the economy altogether and really destroy it, no matter. This did not happen, and there wasn’t even a good reason to think it could, although we don’t always need good reasons to believe something.

Predictably, as time goes on and we proceed in this recovery, those who have been telling tall tales have had to reduce the height of them, but they are still out there, albeit blunted. Diane Swonk, chief economist at Grant Thornton, is still warning us, still thinking we need a vaccine to recover, and still worried about a second wave that will require us to shut things down again and make the job market move back in the other direction.

She was sure of a big second wave not that long ago, but now says, along with others, that it isn’t necessarily possible as long as we keep up the quarantining. Tony Fauci is in the same camp, and has recanted somewhat as well now.

Swonk has also woken up to the reality that a large percentage of people do not plan on getting vaccinated for this, and in recent surveys, a third of people are clearly opposed to it and only about half of all people would probably submit to it if it were available today. This number is expected to decline as we move more and more past the threat, as the numbers continue to go down, and given how long we have before we are confronted with this choice, this is all likely to be well behind us at that point.

This has caused her to become disillusioned, and has gone from we need a vaccine to trying to scold people to change their mind and get it. It’s doubtful that many rely on an economist for such advice or would be willing to submit to such a thing based just upon her preferences.

Swonk hasn’t quite given up on the belief that our current re-opening won’t produce a major second wave of deaths, even though many are seeing the light more and reducing their expectations. If we were going to see this, we’d be seeing this already, even though there never was a good reason to think this. In the absence of thought, all things are possible though it seems.

What stands out the most here, by far, is the lack of belief by the market that things are actually getting better, when something that have should have been pretty obvious has delighted the market so much. The Dow leapt over 800 points on this news, believing the projections even though they were so clearly off base and even out of alignment with the possibilities, and then become so pleasantly shocked when the actual numbers come in so much better.

We saw the same thing with the way that the stock market reacted to the re-opening, where they were also very pleasantly surprised that we didn’t get this second wave that so many were fearful of. This should serve to show us now the market isn’t overoptimistic during these negative influencers, it instead withholds a lot of optimism and even wait for the most obvious of changes to manifest more.

We’ve been telling you right from the outset of this how this pandemic will all play out, with surprising accuracy that should not actually have been surprising provided that people were willing to think on these things with a reasonable degree of sensibility. We would love to claim that this took great vision, but it only took a little, versus the trying to blind ourselves approach that so many others have fallen prey to.

Airline stocks simply took off on Thursday, because guess what, they are actually going to be coming back and are already flying twice as many passengers as they did at the low point of this, with much more coming. If you didn’t realize how overblown the fears of this were though, so much that with each passing day this becomes more apparent, you could have missed this. We’re not even sure why people were so bearish on the re-opening, as this should have been easy to figure out, but so many were anyway, but less so every day now.

Make no mistake though, there will be a lot of economic pain that comes from this that will not be so easily remedied by just allowing people to engage in commerce as they please. A lot of jobs will be lost by this on a net basis and these things do weigh on the economy.

A big decline in the jobs market is in itself a big problem, regardless of how much stimulus there is out there, because this is where we measure our progress. The money supply being kept up is no consolation to the millions that will still be left without a job when we finally re-open fully, and while this stimulus may serve to provide them a little more hope than with normal declines in labor, many will be left to rely on this hope.

This New Jobs Number Might Actually Be Lower than It Should

The only 2.5 million jobs added in this most recent report should actually concern us as this appears to be too low if anything. Among this move from 23 million out of work from the pandemic to 20.5, we’ve both added some new jobs and lost some, with the net being the 2.5 million number. States started opening up in late April, and we’ve had two plus weeks of that, so this might end up indicating that things are moving more slowly than many are expecting, not faster.

However, it’s hard to imagine this being so slow that Greg Daco of Oxford Economics thinks that we’ll still be left with 13 million of these lost jobs still lost by the end of the year. That far out, this means that the net effect will work out to this many not being temporary but the real thing, leaving our unemployment rate still at 10% by then.

A model is only as good as its inputs and assumptions, and the one that saw us losing another 7.5 million this time around shows how far off these things can get. Maybe this made no sense, but if the model spits it out, we don’t always ask too many questions, such as how this many more people could be put out of work with the lockdown in full force with little deterioration in the first half and eased in the second half of the period looked at.

There will be some losses, but to be at 13 million at that point, this means that more than half of the jobs lost during the lockdown won’t be coming back, and the people also won’t find work elsewhere by then. This is unimaginable, which is a good thing because if this actually did happen, we would indeed be in for a long and dark period in our economy.

If we can’t replenish these lost jobs by the end of the year, in the midst of all this stimulus, we need to be wondering when they will be coming back. We’ve got money supply to spare, and a government who has far more willing to stimulate things than ever before, so if the combination of this and business picking up can’t get us any better off than this, we are indeed in trouble.

This sure looks like another case of people setting the bar too low, under-expecting and seeing the results overperform. There are all sorts of varying opinions out there of various qualities, but this does not appear to be a quality one at all.

June’s report, from mid-May to mid-June, should shave quite a bit more off of this 20.5 million that is still outstanding, and we might even get this down to 13 million or less that soon. If not, it shouldn’t take too much longer, when we’ve put the lockdown completely behind us as the states that are still under these measures come on board and we also move away from this social distancing thing more and more as the pandemic fades more and more and eventually disappears.

This will hurt, but given that so much of this was temporary and artificial, and this is not your ordinary 13.3% unemployment rate or not even the 10% that Oxford Economics sees us at next January. It’s a good thing it won’t be, as 10% is an alarming number when it is organic, and at this point, when the circus is over, what we end up will be of this nastier sort.

2021 is more up in the air though as we may have to deal with the threat of President Biden being sworn in. Biden is sounding off against Trump again, not that this is anything new, but is now saying that Trump can’t take credit for this number. Trump did do all he dared to get people back to work, and while he had limited success, he at least influenced this somewhat, where Biden and the Democrats still remain considerably more reluctant.

They were calling the Republicans murderers for wanting to open things up more, and when we end up in a better place due to this alleged attempted murdering, the suspects do deserve some credit.

If Biden were more truthful, he would tell us that while he did his best to keep people unemployed, we managed to open up things this much so far contrary to his wishes, and the presidential candidate that looked to facilitate this was not him, and has been part of the problem, not the solution.

Biden’s de-stimulus plans would help put more people out of work though, so he has that to look forward to if he does end up winning, as he cannot wait to get his hands around the neck of business and the economy and squeeze. We could end up with Big Unemployment the Sequel if we give him this chance.

The fact that we’ll still be left with an unemployment rate still ugly represents an opportunity for the Trump camp if they manage to seize the opportunity and explain to voters, who have already been winged by the lockdown, that they can expect plenty more unemployment if Biden wins. This is not just a risk, it’s a certainty, but people don’t really understand where his plan is headed and we need someone to tell the people that higher taxes means higher unemployment as sure as the sun rises, a lesson that the Trump camp needs to learn more as well so this can be used as a tool to enlighten.

Trump wants to cut them some more to help not only businesses but their workers by cutting payroll taxes, something that should have been done right at the start of this. We need to get the economy healthy again and cannot allow our confusion about how these things work to further impede us to do the right thing and attack this problem more at the source.

We will know more in another month, but this is no time to sit around and wait, and there is going to be plenty of unemployment in the hangover phase regardless. This is not as much about spending more as it is in both reducing the cost of labor so we can keep more people on, and also putting more money in the pockets of workers so they can spend more and get this show back on the road again. This is something neither party should object to right now.

Eric Baker


Eric has a deep understanding of what moves prices and how we can predict them to take advantage. He also understands why so many traders fail and how they may help themselves.

Contact Eric:

Areas of interest: News & updates from the Commodity Futures Trading Commission, Banking, Futures, Derivatives & more.