The US economy created 2.5 million jobs last month – the biggest monthly jobs gain since records began a century ago, albeit only a partial recovery from the 22 million jobs lost during lockdown. These figures have blown expectations out of the water. Economists were predicting yet more unemployment: the consensus was unemployment reaching 8.3 million, or 20 per cent in May, up from 14.7 per cent in April. Defying the odds, unemployment actually fell to 13 per cent, signalling an unexpectedly early start in the rebounding of the American economy. The biggest winners were workers in hospitality, who made up almost half of the new jobs, followed by construction. 'This is a mind-blowing number and shows that the economy is improving,' said Naeem Aslam, chief market strategist at AvaTrade.
US unemployment may still stand at 13 per cent, but a recovery of this scale had not been expected. ‘It seems the damage from the nationwide lockdown was not as severe or as lasting as we feared a month ago,' said Scott Clemons, chief investment strategist at Brown Brothers Harriman. For some time now, the stock market has looked as if it was expecting a V-shaped recovery, the likes of which started today with the FTSE 100, up 100 points. Its future looks brighter still, as the Dow Jones Industrial Average rose 750 points at Friday's open thanks to the new jobs data. It seems in America, the jobs recovery could be V-shaped too.
But can this comeback be replicated? The UK jobs market has not really adjusted due to Rishi Sunak’s furlough scheme, whereby the government agrees to pay 80 per cent of the wages of at-risk employees. As acknowledged by the Prime Minister this week, the UK is facing more job losses before it starts to rebound. What's more, the UK is moving out of lockdown at a snail's pace compared to its European counterparts, and certainly compared to American states, all of which have meaningfully reopened large parts of their economy.
While Americans dine alfresco at restaurants, head to shopping complexes and even get ready for trips to Disney World, the UK has yet to confirm when hospitality and leisure businesses can properly re-open. The push from US citizens to get back to work has undoubtedly contributed to America’s jobs boom – something we’ve yet to see in Britain, and (with the furlough scheme extended into the autumn) may not for some time.
The question for America now is whether it can continue on this trajectory of spectacular job gains. The question for other Western countries is when they will start to follow suit.
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