Economist on May's shocking jobs report: 'Dont get tricked by this number'

Indeed for North America Director of Economic Research Nick Bunker joins Yahoo Finance’s Zack Guzman to discuss the May jobs report as the U.S. economy unexpectedly added 2.5 million jobs with the unemployment rate falling to 13.3%.

Video transcript

ZACK GUZMAN: Let's dig further into this jobs report. As we noted, a huge surprise number there in terms of expectations. But as surprising as it was, I want to drill deeper into the trends that we're seeing there on the employment front and the fact that we're still seeing the labor market historically in a terrible spot with employment only 87% of where it was before the crisis began. A lot of Americans-- I'm sure you know one-- don't have a job right now.

For more on that, want to discuss this with Nick Bunker. He's Indeed North America Director of Economic Research. He joins us right now. And, Nick, I mean, when we look at this, obviously the market's reacting to what is unexpectedly good news. Put that good news in the context of America's employment situation as it stands today.

NICK BUNKER: A growth of 2.5 million payrolls is definitely good news, but I don't think we want to get tricked by this number. There's a possibility that it's a bit of a head fake and that the underlying momentum in the labor market isn't as strong as what we're seeing here. Most of the bounce back in job growth was in sectors directly affected, and there's a possibility that a lot of these gains are from employers pulling back employees to make sure they meet the criteria for government loan programs.

- Yeah, that's exactly right.

ZACK GUZMAN: Yeah, I would like to discuss, you know, a little bit more of that too when we dig into the number of people who were jobless less than five weeks ago. That number decreasing by 10.4 million to 3.9 million. So that would seem to indicate what you're talking about there in terms of hard-hit sectors bringing people back.

When you look beyond that, what does the employment situation look like maybe for some of these other companies as you're talking about? As the PPP loans get tweaked and they have more time to put that money to work, how might that then change how people beyond that are brought back to work?

NICK BUNKER: Well, that could mean that the central bounceback we see or there's an immediate surge in payrolls, slows down, and doesn't peak as high as we might have expected. And then the recovery from there starts to look more like a traditional labor-market recovery, that it's slower and steadier. And if there is some change of policy, it could change just how far or high the jump up is and how much of this recovery will have to become more of a steady crawl.

ZACK GUZMAN: When we look at maybe the long term-- obviously it's super hard to project these things, especially when you only get one kind of point like this, and obviously you don't want to extrapolate too far off of one report. But when you do look at this, you know, a lot of people were expecting the unemployment rate to surge to 20% after that 14.7% reading last month. Instead it goes the other direction now. It's sitting at 13.3%. So what do you think this means for moving beyond the May jobs report looking ahead for the rest of the year if that sets us up to eventually start to amass some pretty sizable job additions through the end of 2020?

NICK BUNKER: I think it's important to look inside the details of the unemployment rate. So the large portion of unemployed for essentially first time ever are those temporary layoffs. And while that number did come down in May, we actually saw an increase in permanent job loss. So that's the unemployment rate for just workers who permanently lost their job ticked up. That's a sign that while the overall unemployment rate is coming down, there's a larger stock of workers out there who have permanently separated from their employer and are going to be harder to get back into a job so that the, you know, hole we're trying to fill back in is perhaps a bit deeper than the overall unemployment rate might have you expect.

ZACK GUZMAN: Lastly, as politicians are kind of trying to tweak what to do about all this now that they think about a next wave of stimulus-- we've heard Republicans going back and forth with Democrats. What do you think that this report kind of indicates in terms of what the next step might be and whether or not you don't need to be adding some of these incentives Republicans have talked about in terms of adding a bonus to get people back to work or if that is already kind of the trend under way right now?

NICK BUNKER: I think there's quite a few signs that the gains we saw in this month of data is really a bounceback in directly affected sectors and probably due to the government programs that we've already seen. So to take that as a sign that, you know, mission accomplished and we can just let these programs expire or perhaps not add further stimulus to the economy is making a pretty big bet that what we've done already is pretty sufficient.

So I fear that one month of data is something you don't want to make too many decisions on, especially significant ones such as this, so that we want to take in more data and understand exactly what's happening with the [INAUDIBLE] in the labor market before making those sorts of decisions.

ZACK GUZMAN: All right, well said. Nick Bunker, Indeed for North America director of economic research, appreciate you chatting with us today. Exciting stuff on the jobs report. Thanks again for taking the time.