U.S. businesses shed 2.8 million jobs in May, significantly less than the 9.3 million job losses that were expected in the private sector. The figure fuels hopes that the worst of the layoffs in the U.S. economy have passed.
The payroll processing company ADP reported Wednesday that businesses have let go of a combined 22.6 million jobs since March, with the bulk of the layoffs occurring in April. Theforced employers to shutter offices, factories, gyms and schools, while demand for gasoline, clothing, airline tickets, hotel rooms and restaurant meals quickly vanished.
Barring a second wave of the outbreak and with some additional government support, Mark Zandi, chief economist at Moody's Analytics, said the COVID-19 recession appears to have only lasted three months.
"It will be the shortest recession on record, but it will be among the most severe," Zandi said on a call with reporters.
Economists are taking the report with a grain of salt, since ADP's figures often differ wildly from the official monthly figures from the U.S. Labor Department, released two days later. Economists expect the Friday report will show 8 million job losses in May as the official unemployment rate approaches 20%.
However, many economists and Wall Street analysts greeted Wednesday's ADP report with optimism. The Dow rose more than 350 points Wednesday to pass 26,000.
"The May ADP employment report was bad, but not nearly as bad as it could have been," PNC's Gus Faucher wrote in a note. "While job losses were enormous, with employment falling 2.5 percent over the month, that was much smaller than the 15.1 percent plunge in April."
The damage was concentrated in two sectors last month: Manufacturers cut 719,000 jobs in May and the trade, transportation and utilities sector let go of 826,000 people.
Other sectors that suffered in April saw their layoffs pace slow sharply in May. The leisure and hospitality industry — which includes hotels and restaurants — shed 105,000 jobs last month, down from a revised 7.7 million losses in April.
"[Rehiring] could be beginning to outpace the continued flood of new layoffs," Michael Pearce, senior U.S. economist at Capital Economics, wrote in a note. "As more states move to reopen, we expect that trend to continue, with employment rebounding potentially quite sharply from June onwards."
Other economic data bolsters hopes that the worst of the economic trough has passed.
The ISM non-manufacturing index, which measures overall service sector activity, rose to 45.4 in May, above its depressed April level and above what economists had expected. A reading under 50 generally indicates contraction, while one over 50 indicates expansion.
The index reading "is consistent with the idea that the economy hit rock-bottom sometime in April, and it suggests we can expect to see an increase in core retail sales in May," Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note.