Many economists were surprised by the exceptional employment growth in May, and two of IHS Markit’s top economists have revised their June economic forecasts because of this data. Here’s what they said in a June 9 IHS Market press release:
“The Bureau of Labor Statistics reported payroll employment rose 2.5 million in May; we, along with other forecasters, had anticipated a large decline,” said Joel Prakken, chief US economist and co-head US economics, IHS Markit, and Chris Varvares, co-head US economics, IHS Markit, in the release.
“The unemployment rate fell from 14.7% to 13.3% instead of rising to the consensus estimate of 19%. We see no compelling reason to dismiss the numbers, which may have been boosted by rehiring funded under the Payroll Protection Program. However, employment in May was so far from expectations that we’ve taken the unusual step of updating the June forecast to reflect these developments.
“Recent data suggest Q2 GDP growth of -41.9%, revised down from -36.5% in May. However, most states’ economies are reopening earlier than we anticipated, and May’s surprise increase in employment implies higher wages and salaries—a boost to consumer spending. In response, we revised our projection for second-half GDP growth up from 7.7% to 11.7%. Unemployment peaks at 13.4% in Q2 before declining to 9.7% by Q4. We still expect a grudging recovery, with GDP growing 5.2% next year, not surpassing the previous peak (as of Q4 2019) until mid-2022, and with the economy not regaining full employment until late 2023.”