Major US stock indices rose 2% to 3% on Friday after the Labor Department reported a gain of 2.5 milion jobs, mostly in restaurants, hospitality and health care. The analyst consensus had forecast a 7.5 million decline in employment, based on the millions of additional unemployment claims filed during May.
It shouldn’t have been a surprise. Google publishes daily data for workplace mobility –the number of smartphones whose GPS signal shows up at workplaces – and a slight improvement is clear from mid-April to mid-May. The second half of May, though, showed no further gains.
Workplace mobility, according to Google’s data, is stuck at 40% below normal levels after an initial bounce from negative 50%. Some food service and other leisure businesses have reopened and hired back some workers, the Google data suggest, but the US is still far from recovery.
The small April-May improvement does help to explain the Labor Department’s report.
This doesn’t look like the “rip-roaring recovery” that Bloomberg News wrote about after the May payroll report. There are very good reasons to remain cautious about the US economic outlook.
First, new Covid-19 cases are running above 20,000 a day. A month ago, as the United States belatedly began large-scale testing, the large number of new cases plausibly could be attributed to the increased number of tests. But the rate remains high, and the risk of a second wave of Covid-19 infection is far higher in the United States than in Europe or East Asia, where the number of new cases is minimal.
Second, small businesses remain extremely cautious about hiring. According to Alignable (hat tip to Lev Borodovsky at the Wall Street Journal) small businesses expected to start 2021 with less than three-quarters of the employees they had at the start of 2020.
Third, American consumers are likely to save more and spend less, as a precaution against hard times, and also because the Federal Reserve has reduced interest rates so much that aging Americans must save more for retirement.
A standard of comparison for rapid recovery is East Asia, where new Covid-19 cases are close to zero.
Japan was the worst hit, but is recovering rapidly, according to Google mobility numbers. Vietnam briefly dipped to 30% below normal but is now 10% above normal. South Korea is back to normal after a brief decline to 25% below, while Taiwan is stable at 20% below normal.