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Employment Report Shock: US Economy Adds 2.5 Million Jobs in May As V-Shaped Recovery Hopes Take Hold

The U.S. economy defied Wall Street expectations last month by adding 2.5 million new jobs as states around the nation re-opened in the wake of the coronavirus pandemic.

The U.S. economy added a surprise 2.5 million jobs last month, the Commerce Department estimated Friday, a shocking increase that boosted global stocks and looks to mystify Wall Street analysts.

The Bureau of Labor Statistics said a net 2.509 million jobs were created last month, compared for a forecast of 9 million losses, pulling the unemployment rate down by 140 basis points 13.3%. The April reading was also revised higher, to 20,687,000 while the March tally was lifted by 492,000 to 1.373 million.

Average hourly earnings, at the same time, fell 1%, compared to a Street consensus of a 1% gain, while the labor force participation rate rose to 60.8% from 60.2%

"After three months of depressing shocks, this morning’s jobs numbers delivered the best shock in economic history. The underlying numbers support the drop in unemployment, including big hiring in restaurants, construction, manufacturing and retail," said Robert Frick corporate economist at the Navy Federal Credit Union. 

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"While the new unemployment number doesn’t jibe with unemployment claims, and the true unemployment number is doubtless somewhat higher, the PPP and states' lifting of lockdowns are having much bigger positive effects than imagined," he added.

Futures contracts tied to the Dow Jones Industrial Average surged following the release to indicate an opening bell gain of 740 points. Contracts tied to the S&P 500, meanwhile, jumped 63 points to trim the benchmark's year-to-date decline to around 2%.

The U.S. dollar index, which tracks the greenback against a basket of six global currency peers, jumped 035% to 96.957 while benchmark 10-year U.S. Treasury bond yields slipped to 0.949%.

Weekly jobless claims data had suggested that as many as 12.2 million Americans filed for unemployment benefits during the reference weeks of April and May that the BLS uses to gauge is employment report. That had analysts looking for May job losses in the region of 7.5 million to 9.0 million and a headline unemployment rate of 20%, the highest since the Great Depression.

However, private payroll processing group ADP said earlier this week that its closely-watched May report showed just 2.76 million job losses, compared to the Street consensus forecast of 9 million, while yesterday's government jobless claims for the week ending on May 30 slowed to 1.877 million.