Instant Reaction: Jobs, June 5, 2020

“Employment data quickly turned for the better with surprising net job creations in May. There are still people getting laid off and filing for unemployment insurance for the first time, but job creations are exceeding that by a good margin of 2.5 million in May. Total personal income actually grew during the lockdown from the massive stimulus package, including enhanced unemployment insurance, and savings rose tremendously. People saved around 8% of their income before the pandemic and they saved 33% of their income in the latest month. With many economies advancing in phases of reopening, more money will be spent and more job additions will follow. Some jobs were temporarily furloughed – such as in dental offices and hair salons, and for building homes – and there is a sizable pent-up demand for these services. Construction jobs, which had fallen by nearly 1 million in April, came back in May with 464,000 additions. Given the strong return of housing demand, construction jobs will continue to be added — perhaps more aggressively than in the past.

The housing sector is in a V-shaped recovery. The broader economy will not be, and the double-digit unemployment rate may persist till the end of the year. Still, the latest jobs data is showing much better recovery potential.”