On the May Jobs Report, and Our 2020 Election Model

A shocking beat, 2.5 million net payrolls gained versus consensus for 7.5 million lost. This confirms higher-frequency data such as claims that have shown sharp improvements in the labor market for two weeks. The unemployment rate fell despite 1.7 million workers entering the labor force. Average earnings fell as low-wage laid-off leisure, health care and retail workers got re-hired. This large low-skill sector of the labor force is fungible human capital, easy both to fire and re-hire, and compensate in the meantime with government aid programs. This gives the US economy a great deal of resiliency in enduring a brief but deep recession. Today’s payroll gains only marginally helped Trump’s re-election prospects, according to our model.