Coronavirus: Markets see signs of economic recovery after better-than-expected US jobs figures
One market analyst says the figures suggest the post-pandemic economic recovery actually began for the US last month.
Friday 5 June 2020 16:25, UK
The US unemployment rate fell to 13.3% in May, down from 14.7% the previous month, as 2.5 million jobs were added in a big surprise to the upside that was reflected on financial markets.
The figures from the US Labor Department were unexpectedly positive amid an economy that is still struggling with the effects of the coronavirus pandemic. Market forecasters had expected eight million jobs to have been lost last month given dire jobless claims numbers.
It comes as some US states start to reopen their economies again, after many businesses were forced to close temporarily in an effort to limit the spread of the illness.
However, within the figures is a 17.6% unemployment rate for Hispanics and 16.8% for African-Americans. The rate for white Americans was 12.4%.
Many economists think the US job market has past the worst of the downturn, after a nine-week decline in the number of people applying for unemployment benefits.
Edward Moya, senior market analyst at OANDA, said: "It is not often you get the headline number and all the components help paint a positive picture of the economy."
He noted that average hourly earnings fell, most likely to point to the return of lower-paying jobs.
"This nonfarm payroll report was supposed to provide a baseline on how bad things got and not that the recovery was already taking hold in May.
"Now financial markets can move forward and it will be hard to build a case against seeing US stocks return to record high territory."
Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas, said: "It's a refreshing thing to experience, a very positive and a far better-than-expected report".
"The unemployment rate was likely to peak in May and then get better from there, but it looks as though it might have peaked in April, which is a very positive development for the economy."
US President Donald Trump responded to the numbers by firing off almost a dozen tweets, describing the figures as "joyous", "incredible" and a "stunner by any stretch of the imagination".
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In early trading in the US, the Dow was up 2.6%, the S&P 500 up 2.2% and the tech-rich Nasdaq gained 1.6%.
Among those stocks benefiting were Boeing on hopes of a pick-up in air travel, and vaccine maker Novavax which announced US government funding for its prospective COVID-19 vaccine.
Stock markets across Europe and in the UK also reacted positively to news that the world's biggest economy was showing signs of recovery.
The FTSE 100 was up 2% in late afternoon trading on Friday.
However, it remains more than 10% down in the year to date, trading at levels last seen three months ago following February's COVID-19 pandemic panic.
France's CAC 40 was up more than 3%, the German DAX climbed 2.9%, Italy's MIB rose 2.5% and Spain's IBEX gained 3.9%.
In the UK, airlines showed some gains, investors shrugging off concerns over the UK's planned quarantine for arriving passengers and concentrating more on the growing prospect of resuming flights.
British Airways owner IAG and easyJet both showed strong gains - up 13% and 7% respectively by 3.30pm. Gains for Ryanair and Wizz Air were slighter.
Just before lunchtime, the pound rose to a three-month high against the dollar and was set for its biggest weekly gain since the end of March while it was also sharply higher against the euro despite a lack of progress in Brexit talks.