The US faces not a V-shaped recovery but a reverse tick shape after shocking jobs data, analysts say

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• The US economic recovery will likely resemble a “reverse tick” more than a “V,” Rabobank analysts said on Monday.
• Their analysis followed surprising jobs data on Friday that showed US employers added 2.3 million jobs in May, reducing the unemployment rate to 13.3%.
• Economists had earlier predicted payrolls would be down by 7.5 million.
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Economists were baffled on Friday by jobs data showing US employers added 2.5 million workers to their payrolls in May, upending expectations of 7.5 million job losses and delivering what Rabobank analysts described as the “largest and most significant beat ever.”

The analysts argued it was highly unsurprising that economists’ forecasts were wrong because financial markets are currently disconnected from reality. They also suggested the US economic recovery might not be as rapid as many hope.

“What we have is not a V-shape but a reverse tick shape: down huge and up a little,” they said in a note on Monday.

In a V-shaped recovery, an economy suffers a sharp economic decline followed by a fast and sustained recovery back to its previous peak. The US economy delivered V-shaped recoveries from the recession that followed World War I and the 1953 downturn.

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The Rabobank team said a reverse tick shape, similar to an inverted Nike swoosh, could be a more accurate description of the economic recovery this time around.

More jobs will return as sectors reopen, and there will be more clarity on market recovery once government support schemes wind up, the analysts added. 

The unemployment rate declined to 13.3% in May, defying forecasts of a near-record 19% reading. 

Dan Alpert, co-creator of the U.S. Private Sector Job Quality Index, told Business Insider that the rise in employment is clearly linked to the Paycheck Protection Program and “other federally-funded re-payrolling initiatives.”

The PPP was established to aid small businesses with loans that are excusable if the funds are used for payrolls during the COVID-19 outbreak.

On Wednesday, the Federal Reserve is expected to announce more action on the main street lending facility, comment on the economy, and hint at less easing.

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