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The US employment report surprised on the positive direction on Friday, with payrolls rising by 2.5 million. According to National Bank of Canada’s analysts, Krishen Rangasamy the recovery of the US labour market has started. 

Key Quotes:

“After April’s record jobs purge, the U.S. labour market produced yet another surprise, this time in the other direction. Consensus had been looking for another month of heavy job losses based on the high rate of layoffs i.e. weekly initial jobless claims. But in the end, the latter was more than offset by a turnaround in the hiring rate as the economy reopened for business.”

“Job creation was widespread in the private sector as evidenced by the employment diffusion index which climbed to its highest level since 2018. Particularly encouraging were employment gains in cyclical sectors such as manufacturing and construction, and rebound in services sectors such as leisure/hospitality.”

“It’s worth noting, however, that non-farm payrolls are still down 13% from February’s peak.”

“Until a vaccine becomes available to the general public, businesses will have to adapt to social distancing measures, persistent fear of contagion, and a higher propensity to save, all of which will likely restrain consumer demand, business turnover and hence capacity to hire.”