June 2020 National Economic Outlook

Executive Summary

According to the National Bureau of Economic Research, the U.S. economy reached a peak in economic activity in February and then fell into recession, defined as “a significant decline in economic activity spread across the economy, normally visible in production, employment, and other indicators.” The previous expansion started in June 2009 and lasted 128 months, the longest expansion in U.S. history. 

The NBER Business Cycle Dating Committee noted that “the pandemic and the public health response have resulted in a downturn with different characteristics and dynamics than prior recessions. Nonetheless, it concluded that the unprecedented magnitude of the decline in employment and production, and its broad reach across the entire economy, warrants the designation of this episode as a recession, even if it turns out to be briefer than earlier contractions.”

Against expectations for another huge drop in employment in May, net jobs (as measured in a survey of employers) rose by 2.509 million over the month. This came about as businesses reopened as states gradually lifted restrictions on movement. Private-sector employment rose by 3.1 million, while government employment fell by 585,000. 

• The 2.5 million net jobs added in May was the largest increase in the history of the survey, going back to 1939. But the gains made up only 11 percent of the jobs lost in March and April. 
• The decline in employment in April of 20.687 million was by far the greatest number for job losses in a single month in the history of the series.
• The unemployment rate fell to 13.3 percent in May from 14.7 percent in April as the number of unemployed (from a survey of households, different from the survey of employers) fell by 2.093 million. 
• The number of employed in the household survey rose by 3.839 million, while the labor force increased by 1.746 million. 

Although the May drop in the unemployment rate was encouraging, it was still up from 3.5 percent in February. It also appears that some workers have misclassified themselves as employed but absent from work in the household survey, when they really should be classified as unemployed on temporary layoff. Thus, it is likely that the true unemployment rate in May was closer to 16 percent than the measured rate of 13.3 percent. But that same problem was also an issue in April, and thus the decline in the unemployment rate in May was bona fide.

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