Consumer-focused sectors may have led the way as shops and restaurants reopened, but the surprising U.S. jobs recovery in May was also surprisingly broad-based.
One way of measuring the breadth of the recovery is a "diffusion index" produced by the U.S. Bureau of Labor Statistics, a 0-100 gauge of hiring across 258 industry classifications. A reading of 100 would mean all industries are adding jobs, while 0 would mean all are shedding workers.
In April, this index was 3.9. In May, it was 64.
The jump in the diffusion index affirms that job growth, measured by the BLS at 2.5 million in May after economists expected a loss of more than 7 million, is not concentrated among a select grouping of sectors, said Martha Gimbel, manager of economic research with Schmidt Futures.
While the leisure and hospitality sector added 1.24 million jobs in May and retail trade added 368,000, the diffusion index shows that growth was prevalent through large pockets of the economy. As a whole, the BLS reported 2.5 million job gains in May after a consensus of economists' forecasts called for a loss exceeding 7 million.
Other winners in May were construction, with 464,000 jobs added, and healthcare, with 391,000 — including nearly 245,000 in dentists' offices alone — according to BLS data.
Gimbel said the widespread gains were likely fueled by the federal Paycheck Protection Program, which was designed to reward small businesses for keeping employees on the payroll with hundreds of billions of dollars in loans that can turn into grants.
"If that is the case, we would expect the jobs added to be relatively well distributed because many different industries were getting PPP money," she said.
While the index was a positive economic signal, economists cautioned that there are far too many unknowns to properly forecast whether the worst of the jobs market has been felt.
"We shouldn't be reading too much into anything right now," Gimbel said.
For example, workers on temporary layoff, or furlough, fell to 15.34 million in May, down from 18.06 million in April, according to the BLS. Before the pandemic, this level had never exceeded 2.52 million in the history of the BLS data series.
If most of the 2.7 million workers who came off furlough in May were recalled to work, this is a highly positive sign. On the other hand, the vast pool of furloughs represents workers at risk of permanent layoffs.
"The question that no one has an answer to is: How many of those will turn into permanent job losses?" said Michael Pugliese, an economist with Wells Fargo, in a June 5 interview. "If 10% of them do, that’s not bad. If 90% of them do, that’s obviously quite terrible."
The number of permanent job losses rose by 295,000 in May, to 2.3 million, according to the BLS.