US Stock Market Gains as Labor Market Improves in May 2020

(7 June 2020) The US labor market improved in May as millions of workers returned to work after COVID-19 induced layoffs, sending positive reverberations through the US stock market. The labor market added 2.5 million non-farm jobs in May and the unemployment rate decreased to 13.3 percent* from 14.7 April, remaining higher than in any previous post-war recession.

• The rate would be still higher if it was able to capture the millions of people who are not working and want a job, perhaps not looking for work because of fears relating to coronavirus.
• The unemployment rate gains were unequal across racial groups. The rate increased marginally for African Americans to 16.8 percent from 16.7 percent in April, while unemployment for whites declined to 12.4 percent from 14.2 percent in April.

The stock market surged on 5 June after the jobs report showed surprising improvement. The S&P 500 index rose 2.62 percent Another major Wall Street index, the tech-heavy Nasdaq composite—including companies like Amazon, Apple and Microsoft—increased 2.06 percent. The Dow Jones Industrial average gained 829 points to 3.15 percent.

• The US government has injected around $3 trillion into the economy to mitigate the impact of  the COVID-19 pandemic. The stimulus has been one of the key drivers behind the stock market recovery from its March lows.  

* The Bureau of Labor Statistics, responsible for the monthly jobs reports, said it is working to fix a “misclassification error” and the “overall unemployment rate would have been about 3 percentage points higher than reported,” meaning the US unemployment rate for May is expected to be about 16.3 percent.