- Non-farm payrolls rise by 2.54 million in May, rather than losing 8 million.
- Unemployment rate fell to 13.3% from 14.7%, much better than the -19.8% prediction.
- Underemployment rate falls to 21.2% from 22.8%.
- Equity futures soar, dollar gains, Treasury yields rise.
The labor market collapse reversed in May as a totally unexpected gain in employment underlined the resilience of the American economy and the positive impact of the government’s efforts under the $2 trillion Payroll Protection Program to keep people at work.
Non-farm payrolls rose by 2.54 million last month, a vast improvement from the 20.5 million who were furloughed in April and less than half the -8 million forecast.
Non-farm payrolls
Continuing unemployment claims had signaled two weeks ago that people might be returning to work when the total receiving unemployment benefits dropped 4.074 million instead of rising 838,000.
Private payrolls for May from Automatic Data Processing (ADP), the paycheck preparation giant that covers about one-sixth of the US market, suggested the same when they fell just 2.76 million rather than the 9 million consensus forecast.
Underemployment and initial claims
The unemployment rate, U-3, fell to 13.3% in May from 14.7% in April and 4.4% in March. That 8.9% jump in sixty days of reporting is still the fastest rise in joblessness in US records that go back almost a century. The highest unemployment in US history was 25.6% in May 1933.
The underemployment or U-6 rate, that includes individuals who have looked for work in the past year rather than just the prior month of the traditional U-3 list declined to 21.2% from 22.8%.
Almost 43 million people have filed initial jobless claims, an astonishing 26% of the workforce. In the week of May 22 13% of workers, 21.5 million people, were collecting unemployment benefits.
Market reaction
The economic debacle has practically vanished from the equity and currency markets. Dow futures jumped from 280 points before the release to more than 600. The Dow and S&P have largely erased their pandemic losses with the Dow down 5.92% on the year and the S&P 500 off 2.59% before the market open on Friday.
The dollar gained after the release initially rising about 30 points versus the euro and about 50 against the yen. Over the past three weeks the dollar has surrendered all of its pandemic risk-premium and is trading at pre-crisis level in all the major pairs.
Treasury yields spiked following the news with 10-year surging above 0.9% and the 2-year scaling 0.2%.
National impact
The economic collapse and the seemingly endless string of negative superlatives in economic statistics from the labor market, retails sales, durables good and soon to come second quarter GDP brought on by the imposed economic shutdowns has upended normal life in the United States.
Early concerns that the food supply chain might crack as people hoarded food and transport workers were unavailable to ship produce and goods to markets have proved to be false. Except for a few early instances of stripped supermarkets and distancing regulations food shopping has been unaffected.
Even though all states have lifted their shelter-in-place orders, many businesses remain closed and restrictions still limit social gatherings.
The states that reopened their economies first, Georgia, Texas and Florida have seen no appreciable rise in coronavirus cases or fatalities but despite those examples states on the coast, California and New York for example remain under modified closure orders with large swatch of their commercial life still closed.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD remains pressured below 1.0800, US data eyed
EUR/USD is trading under pressure below 1.0800 in European trading on Friday. A renewed US Dollar uptick and a cautious mood weigh on the pair, as traders digest the Trump win and the Fed rate cut ahead of the US preliminary Consumer Sentiment data for November.
GBP/USD holds lower ground near 1.2950 amid tepid risk sentiment
GBP/USD edges lower toward 1.2950 in the early European session on Friday. The emergence of dip-buying in the US Dollar and a tepid risk tone undermine the pair. The BoE’s cautious rate cut could check the pair's downside, as traders look to BoE-speak, US data for fresh incentives.
Gold price seems vulnerable while below $2,700 amid stronger USD, positive risk tone
Gold price drops to the $2,680 area during the first half of the European session on Friday and is pressured by a combination of factors. Hopes that Trump's policies would spur economic growth and inflation, to a larger extent, overshadow the Fed's dovish outlook, which, in turn, helps revive the USD demand.
Bitcoin touches new all-time high near $77,000 following Fed rate cut
Bitcoin price rallied and reached a new all-time high of $76,849 following the US Federal Reserve’s 25 basis point rate cut. Ethereum and Ripple followed suit and closed above their key resistance levels, hinting at a possible rally ahead.
Outlook for the markets under Trump 2.0
On November 5, the United States held presidential elections. Republican and former president Donald Trump won the elections surprisingly clearly. The Electoral College, which in fact elects the president, will meet on December 17, while the inauguration is scheduled for January 20, 2025.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.