U.S. jobless rate unexpectedly fell in May as hiring rebounded

America’s labor market unexpectedly rebounded in May, signaling the economy is picking up faster than thought from the depths of the damage from the coronavirus pandemic.

Nonfarm payrolls rose by 2.5 million after a 20.7 million tumble the prior month that was the largest in records back to 1939, according to Labor Department data Friday. The jobless rate fell to 13.3% from 14.7%.

Economist forecasts had called for a decline of 7.5 million in payrolls and a jump in the unemployment rate to 19%. No one in Bloomberg’s survey had projected improvement in either figure.

Treasury yields and U.S. stock futures jumped after the surprise report, while the dollar spiked against the yen.

The unexpected improvement wasn’t limited to the U.S. figures. North of the border, Canadian employment rose 290,000 in May, compared with forecasts of a 500,000 slump, its statistics office reported Friday.

The data show a U.S. economy pulling back from the brink as states relax restrictions and businesses bring back staff, while supporting a rebound in the stock market. At the same time, the lack of an effective treatment for COVID-19—which has already killed more than 100,000 in the U.S.— means infections may persist and possibly surge in a second wave, with the potential to further shake the labor market and extend the economic weakness.

“These improvements in the labor market reflected a limited resumption of economic activity that had been curtailed in March and April due to the coronavirus pandemic and efforts to contain it,” the Labor Department said in a statement.

The latest figures may give a boost to President Donald Trump, who has fallen behind Democratic challenger Joe Biden in polls amid the pandemic, recession and now nationwide protests over police mistreatment of African-Americans. The numbers come amid a debate over the timing and scope of additional stimulus, with Democrats and Republicans at odds following record aid approved by Congress to cushion the downturn.

Minutes after the release, Trump tweeted: “Really Big Jobs Report!” He said he would hold a news conference at 10 a.m. in Washington to discuss the report.

One caveat noted by the U.S. Labor Department: the unemployment rate “would have been about 3 percentage points higher than reported” if data were reported correctly, according to the agency’s statement. That refers to workers who were recorded as employed but absent from work due to other reasons, rather than unemployed on temporary layoff.

Unemployment rates declined among adult men and women, white Americans, and slightly for Hispanic and Latino Americans.

But the rate was little changed among African Americans, at 16.8%, the highest since 2010, amid the protests that have also drawn attention to economic disparities.

Even with the surprising gain in May, it may take months for all those who lost work in April and March to find jobs. Some economists forecast the rate could remain in double-digits through the November elections and into next year.

For weeks, economists had warned that unemployment in May could hit 20% or more.

The street protests over George Floyd’s killing that led to vandalism and looting in dozens of cities did not affect Friday’s figures, which were compiled in the middle of May. But business closings related to the unrest could show up in the June report.

A few businesses are reporting signs of progress even in hard-hit industries. American Airlines, for example, said this week that it will fly 55% of its U.S. routes in July, up from just 20% in May.

And the Cheesecake Factory said one-quarter of its nearly 300 restaurants have reopened, though with limited capacity. Sales are at nearly 75% of the levels reached a year ago, the company said.

Erica Groshen, a labor economist at Cornell University and a former commissioner of the Labor Department’s Bureau of Labor Statistics, said hiring could ramp up relatively quickly in the coming months and reduce unemployment to low double-digits by year’s end.

“Then my inclination is that it will be a long, slow slog,” she said.

Until most Americans are confident they can shop, travel, eat out and fully return to their other spending habits without fear of contracting the virus, the economy is likely to remain sluggish.