Despite dire predictions by most economists, the economy rebounded last month, adding back 2.5 million of the approximately 30 million jobs that have been lost due to the Covid-19 crisis. This caused the unemployment rate to drop to 13.3 percent from 14.7 percent in April, which was a post-war high. This was a pleasant surprise, to say the least, since most were expecting unemployment to rise as high as 20 percent.
This last month’s gains in employment were driven by increases across several sectors, including those with business primarily in face-to-face transactions, like leisure and hospitality and retail trade.
This report resolves at least some of the dissonance between economic indicators and recent activity on Wall Street, which has remained optimistic despite reports of tragically high unemployment. Economic activity remains far below pre-crisis levels, due in large part to continued restrictions aimed at preventing further spread of the coronavirus, but this news suggests the potential for activity to resume more quickly than many had anticipated.
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Beth Akers is a senior fellow at the Manhattan Institute and a former Council of Economic Advisors economist. Follow her on Twitter here.