Market Talk

Jobs picture's getting better, huh? Prove it.

Instead of rejoicing markedly slowing job losses last month, cynics are questioning the validity of the government report.

There’s some skepticism in the market about today’s employment data as the model accounting for business births and deaths effectively added as many as 220,000 jobs to the monthly report.

The Bureau of Labor Statistics reported nonfarm payrolls declined 345,000 in May, well below the 525,000 decline economists expected. But including the 220,000 from the birth/death model in the headline number would’ve brought the finally tally much closer to economists’ expectations.

Labor secretary Hilda Solis even acknowledged on a conference call with reporters (according to Barron’s Bob O’Brien) that rumors were flying through the market that the jobs report contained an error and it would be corrected. But Solis denied anything was incorrect.

But given the big gap between the reported monthly figure and economists’ estimates, O’Brien says people will eagerly look at next month’s monthly revisions.

“Investors seemed to be tempering their enthusiasm to discount the anticipated adjustment,” he says. “Or they’re simply listening to traders who weren’t positioned for such a surprisingly accommodating — at least versus expectations — number, and who have conducted the kind of rumor-mongering that could be expected.”

Meanwhile, former Portfolio blogger Ryan Avent is perplexed about the negative analysis surrounding the report. Only 345,000 jobs lost in May easily exceeds expectations, is the best monthly report since January and marks a 50% drop in losses since the downturn’s peak in January, he notes.

“Once again, everyone is saying all this means is that things are getting worse more slowly, to which I again note that that’s how one moves from a rapidly deteriorating economy to a growing economy,” Avent says. “To act as if this is just more of the same bad news we’ve been getting since January is simply inaccurate.”

Still, Gluskin Sheff chief economist David Rosenberg cautions investors to keep today’s jobs numbers in perspective.

“Before the Lehman collapse, when equities were in a moderate bear market and bonds in a moderate bull market, the worst nonfarm payroll result we saw was -175,000,” he notes. “We don’t seem to recall too many pundits rejoicing over employment declines at that time, which were basically half of what was just posted in May.”

Not to mention, the worst nonfarm payroll decline in the 2001 recession was 3250,000 and in 1990-91 it was 306,000, he notes.

“It is difficult to rejoice over an employment data that is consistent with real GDP still declining anywhere from 2% to 4% at an annual rate,” Rosenberg says.

Dow Industrials see-sawing; recently down 5 at 8745 in mid-afternoon trading.

(John Shipman contributed to this report.)