Western Asset Blog: The Jobs Also Rises

Blog

Stay up to date on timely topics and market events. Subscribe to our Blog now.

Well, that was a nice surprise! Financial markets were bracing themselves for another 8 million jobs lost in May. Instead, the BLS this morning reported a gain of 2.51 million jobs in May, with private-sector jobs up 3.09 million, and our favored jobs measure—private-sector jobs excluding construction and retailing—up 2.26 million.

Yes, the March and April data were revised down substantially, with an extra 500,000 private-sector jobs lost in March and an extra 200,000 in April. (Our preferred measure showed an extra 420,000 lost in March and an extra 1,000 in April.) Still, the fact that the COVID-shutdown carnage did not appear to continue in May is clearly the takeaway here.

The Street had been looking for further huge declines because of the unemployment claims data, which had risen by something like 30 million from March through May. For our part, we have never found much quantitative signal coming from the jobless claims data. Furthermore, with the shutdown beginning nationwide around March 11, we just didn’t see who would be left to furlough in May. That intuition proved to be much more accurate than we would ever have a right to believe.

The May jobs gains were NOT widely distributed across industries. Rather, a few sectors that previously had been hit extremely hard by the shutdown saw something of a May bounce.

Leading the way was the restaurant industry, which shed 6.05 million jobs in March and April and then rehired 1.37 million workers back in May. Apparently, the shift to takeout and curbside pickup allowed this partial rebound. Next on the list was construction, with 1.05 million of job losses in March/April followed by 0.46 million of gains in May. Retailing lost 2.37 million jobs in March/April and recouped 0.37 million in May. Health care services lost 1.57 million in March/April, recouping 0.31 million in May. Finally, after 1.47 million jobs lost in March/April, manufacturing brought back 0.23 million in May.

Other service sectors especially hard hit by the shutdown, namely hotels and passenger travel, did suffer further job losses in May. Even in these sectors, though, the May losses slowed to a virtual trickle.

No, the gains reported for May do not clearly signal that a rebound has begun, let alone a V-shaped one. However, they do strongly suggest that the worst of the shutdown effects had been felt by the end of April. And with shell-shocked leisure- and health-oriented services seeming to catch their breath in May, and other sectors such as construction and manufacturing looking ready for a bounce, there is still reason to look for a more pronounced rebound in June and after than the naysayers are predicting.

© Western Asset Management Company, LLC 2024. The information contained in these materials ("the materials") is intended for the exclusive use of the designated recipient ("the recipient"). This information is proprietary and confidential and may contain commercially sensitive information, and may not be copied, reproduced or republished, in whole or in part, without the prior written consent of Western Asset Management Company ("Western Asset").

Past performance does not predict future returns. These materials should not be deemed to be a prediction or projection of future performance. These materials are intended for investment professionals including professional clients, eligible counterparties, and qualified investors only.

These materials have been produced for illustrative and informational purposes only. These materials contain Western Asset's opinions and beliefs as of the date designated on the materials; these views are subject to change and may not reflect real-time market developments and investment views.

Third party data may be used throughout the materials, and this data is believed to be accurate to the best of Western Asset's knowledge at the time of publication, but cannot be guaranteed. These materials may also contain strategy or product awards or rankings from independent third parties or industry publications which are based on unbiased quantitative and/or qualitative information determined independently by each third party or publication. In some cases, Western Asset may subscribe to these third party's standard industry services or publications. These standard subscriptions and services are available to all asset managers and do not influence rankings or awards in any way.

Investment strategies or products discussed herein may involve a high degree of risk, including the loss of some or all capital. Investments in any products or strategies described in these materials may be volatile, and investors should have the financial ability and willingness to accept such risks.

Unless otherwise noted, investment performance contained in these materials is reflective of a strategy composite. All other strategy data and information included in these materials reflects a representative portfolio which is an account in the composite that Western Asset believes most closely reflects the current portfolio management style of the strategy. Performance is not a consideration in the selection of the representative portfolio. The characteristics of the representative portfolio shown may differ from other accounts in the composite. Information regarding the representative portfolio and the other accounts in the composite are available upon request. Statements in these materials should not be considered investment advice. References, either general or specific, to securities and/or issuers in the materials are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendation to purchase or sell such securities. Employees and/or clients of Western Asset may have a position in the securities or issuers mentioned.

These materials are not intended to provide, and should not be relied on for, accounting, legal, tax, investment or other advice. The recipient should consult its own counsel, accountant, investment, tax, and any other advisers for this advice, including economic risks and merits, related to making an investment with Western Asset. The recipient is responsible for observing the applicable laws and regulations of their country of residence.

Founded in 1971, Western Asset Management Company is a global fixed-income investment manager with offices in Pasadena, New York, London, Singapore, Tokyo, Melbourne, São Paulo, Hong Kong, and Zürich. Western Asset is a wholly owned subsidiary of Franklin Resources, Inc. but operates autonomously. Western Asset is comprised of six legal entities across the globe, each with distinct regional registrations: Western Asset Management Company, LLC, a registered Investment Adviser with the Securities and Exchange Commission; Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorized and regulated by Comissão de Valores Mobiliários and Brazilian Central Bank; Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services License 303160; Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services License for fund management and regulated by the Monetary Authority of Singapore; Western Asset Management Company Ltd, a registered Financial Instruments Business Operator and regulated by the Financial Services Agency of Japan; and Western Asset Management Company Limited is authorised and regulated by the Financial Conduct Authority ("FCA") (FRN 145930). This communication is intended for distribution to Professional Clients only if deemed to be a financial promotion in the UK as defined by the FCA. This communication may also be intended for certain EEA countries where Western Asset has been granted permission to do so. For the current list of the approved EEA countries please contact Western Asset at +44 (0)20 7422 3000.