Unemployment figures released on June 5, 2020 were a big surprise as companies hired 2.5 million workers in May 2020 and the unemployment rate fell 13.3%. Hiring was strong across the private sector with the biggest e change in the Service Sector as restaurants, hotels, and other travel and leisure businesses hired back employees.
There are two theories for strong Service Sector hiring:
While the June 5 number was optimistic, unemployment is still at 13.3% and most projections are for rehiring to be slow. The Federal Reserve announced that they expect unemployment to still be at 9.3% at the end of the year which is extremely high. Also, once expanded unemployment benefits end in July, it is likely that high unemployment will have a more dramatic impact to the economy slowing a potential recovery.
There are two theories for strong Service Sector hiring:
- A byproduct of the Paycheck Protection Program (PPP) launched in April 2020, as companies hired back previously laid off employees to take advantage of the loan forgiveness provisions.
- The reopening of the economy is generating enough demand for employers to hire back some of their workforce, suggesting a quicker recovery that initially forecast.