Surprise Data: Unemployment Rate Drops to 13.3% in May

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In May, the unemployment rate posted a surprise decline to 13.3% and total payroll employment rose by 2.5 million as the economy partially reopened.

Residential construction employment rose by 226,000 in May to 2.7 million, partially reversing a loss of 422,000 in April. Total construction industry (both residential and nonresidential) employment rebounded to 7.0 million in May.

In the Employment Situation Summary for May, total nonfarm payroll employment increased by 2.5 million, after declines of 1.4 million in March and 20.7 million in April. The increase in May is the biggest gain on record as the economy starts to recover from the COVID-19 pandemic. Monthly job changes in March and April were revised down. The March increase was revised downward from an initial estimate of -881,000 to -1.4 million, while the April increase was revised downward by 150,000 from -20.5 million to -20.7 million. With the revisions, the economy lost 22.1 million jobs in March and April due to the impact of the COVID-19 pandemic.

After the widespread loss in all the major sectors in April, many industries sectors increase in May. Employment in leisure and hospitality, construction, education and health services, and retail trade had the largest gains in May, while government employment continued to decline sharply.

Meanwhile, the unemployment rate dropped to 13.3% in May, down from a recent high in April. In May, the number of employed persons increased by about 3.8 million, while the number of unemployed persons declined by 2.1 million to 21.0 million. Among all the unemployed persons, about 73% classified themselves as on furlough or a temporary layoff and expected to be recalled back to work. The labor force participation rate, the proportion of the population either looking for a job or already with a job, rose by 0.6 percentage point to 60.8% in May, following a decrease of 2.5 percentage points in April.

The surprise decline in the unemployment rate and dramatic job gains are very good news amid the COVID-19 pandemic, showing early signs of recovery as states start to reopen and businesses call back workers. These better than expected job situation is also a cause behind recent relative strength in housing demand.

Additionally, employment in the overall construction sector increased by 464,000 in May, after a revised decrease of 995,000 in April. The number of residential construction jobs rose by 226,000 in May, after the largest drop in April.

Residential construction employment now stands at 2.7 million in May, broken down as 783,000 builders and 2.0 million residential specialty trade contractors. The 6-month moving average of monthly job changes for residential construction is -29,100 a month, reflecting the largest job loss in April. Over the last 12 months, home builders and remodelers shed 148,400 jobs on a net basis. Since the low point following the Great Recession, residential construction has gained 764,300 positions.

In May, the unemployment rate for construction workers dropped to 15.2% on a seasonally adjusted basis, from 16.1% in April. The unemployment rate for construction workers has trended downward for the past ten years and remained at a relative low level in the beginning of 2020. The unemployment rate in April and May reflected the impact of the COVID-19 pandemic on construction industry.



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