US LABOR MARKET STARTS STABILIZING IN MAY
Employment data for May strongly surprised on the upside. According to today’s release 2.5 mn jobs were added in May against expectation of a sharp job destruction. However, the headline numbers were severely distorted by the fact that several workers on temporary layoff due to Covid-19 were classified as employed
The surge in employment in May (2.5 million) was in large part due to a statistical misclassification. A more exact recording would put the unemployment rate at 16 to 16.5%, from the 13.3% of the official release. Alternative measurements show unemployment at around 20% in the first half of the month.
Jobless claims have likely peaked and higher frequency indicators point to a tentative increase in rehiring. However, uncertainty will slow down job creation and we expect an unemployment rate above 10% at the end of the year.