US Private Hiring Surges, Aid Claims Fall As Economy Bounces Back

A surge in private hiring and drop in weekly jobless claims are the latest signs Americans are returning to work in large numbers after the Covid-19 pandemic caused mass layoffs a year ago.

A survey released Thursday said the US private sector added a whopping 978,000 jobs in May, while government data showed new filings for unemployment benefits last week fell below 400,000 for the first time since Covid-19 forced businesses closed across the United States in March 2020.

The data augers well for the government's employment report due out Friday, which is expected to show strong hiring in the world's largest economy last month and provide reassurance that it is indeed recovering from the pandemic after unexpectedly weak job growth in April.

"It is all coming together, as the pandemic fades and businesses reopen, and workers are starting to see the benefits," economist Joel Naroff said.

In another sign of the economy's bounceback, the Institute for Supply Management (ISM) reported its index of service sector activity climbed to an all-time high in May after reaching its 12th straight month of expansion.

"The rate of expansion is very strong, as businesses have reopened and production capacity has increased," the survey's chair Anthony Nieves said in a statement.

The upbeat reports underscore just how effective Covid-19 vaccination campaigns have been in getting business back to normal in the United States, which saw the world's largest outbreak of the virus with more than 592,000 people dead.

After tens of millions of people lost their jobs last year after states orders businesses to close or severely curtail operations to stop Covid-19 infections, payroll services firm ADP reported some of the hardest hit sectors were rehiring strongly in May.

The services sector added 850,000 positions, more than half of which were in leisure and hospitality, the sector hardest hit by the restrictions. Goods-producing firms added 128,000 jobs in a report that was the largest overall gain since June of last year.

Separately, the Labor Department said 385,000 new seasonally adjusted jobless benefit claims were made in the week ended May 29, a new low since the pandemic began.

Another 76,098 people, not seasonally adjusted, made claims under the Pandemic Unemployment Assistance (PUA) program for workers not normally eligible for aid, about 17,000 less than the week prior.

"Downward trend in unemployment benefits is encouraging but absolute levels still concerning," Gregory Daco of Oxford Economics said on Twitter, pointing to the more than 15.4 million people as of the week ended May 15 who were receiving some form of unemployment benefit.

Both reports are seen as predictors for the May employment data the Labor Department will release Friday, which is expected to see the economy add 720,000 jobs and the unemployment rate decline to 5.9 percent.

However companies have also reported struggling to hire workers, with some taking steps like offering signing bonuses or raising wages to induce people to take open positions.

Ian Shepherdson of Pantheon Macroeconomics warned that dynamic may mean the ADP report is out of sync with the official government data.

"Firms appear not to be able to find all the workers implied by the strong macro data," he said in an analysis, "so we think ADP likely will overstate the official numbers for the second straight month."

ISM reported similar trends in its index of service sector activity, which climbed to 64 last month, an increase of 1.3 points.

Despite the improvements, prices continued to climb and respondents reported rising costs for commodities, a consequence of complications seen across supply chains as major economies spring back to life worldwide.

"Some capacity constraints, material shortages, weather-related delays and challenges in logistics and employment resources continue," Nieves said.