In the annals of economic surprises, the news that the U.S. added 2.7 million jobs in May, marking an astounding reversal from COVID-19’s crushing blow to employment, was one for the ages. Few predicted that such a momental jump could be repeated, let alone surpassed in the next month, but the seemingly impossible just happened. At 8:30 a.m. on July 2, the U.S. Department of Labor announced that 4.8 million more Americans returned to work in June. That almost doubles the May dazzler, itself an all-time record, and beats any monthly number in history prior to the pandemic by a margin of 4 to 1.
Predictably, the stock market cheered, the S&P jumping 35 points, or 1.15%, by midmorning on Thursday to stand within 3% of where it started the year, as the Nasdaq notched another all-time high. The jobs jump is as heartening as it is stunning. But to stage a full comeback, to restore America’s consumer spending and confidence to the robust levels that prevailed before the crisis, the U.S. needs to get back to the pre-pandemic jobless rate of 5% or below.
Put simply, we’re now benefiting from the easy part, adding millions of positions in retail, restaurants, and hotels as the economy (albeit haltingly) reopens. Many of those jobs that vanished so quickly are returning far faster than predicted. Nevertheless, for many of the “temporarily unemployed” in hospitality, stores, and health care, getting back to work will be a long slog. And for folks who were just plain laid off, with no prospect of being rehired, the road will be even longer and tougher.
In fact, returning to 5% unemployment will probably take another five years, according to an analysis by Chris Rands, a fixed-income portfolio manager at Nikko Asset Management. Rands presents the most logical forecast this reporter has seen on how fast jobs will return. His outlook calls for a two-stage recovery consisting of the strong bounce back that’s unprecedented because it follows a collapse that’s also unprecedented, followed by grinding gains that reflect America’s much slower historical pattern for growing the employment. So let’s dig into Rands’ analysis, updated for the big gains posted in the June report.