Reading Jobs Data With Disbelief

The unemployment rates and jobs data almost does not add up on the surface. Some of this may boil down to seasonality issues, but many traders are scratching their heads after seeing this report.  The July unemployment rate came in at 9.4% rather than a 9.7% consensus estimate.  That is actually a drop from the 9.5% reported in June.  The change in non-Farm Payrolls came in at -247,000, and we had estimates anywhere from -275,000 to  -350,000.

This drop in payrolls was the smallest decline since last August.  But the unofficial unemployment rate including underemployed or those on temporary contracts is close to 16%.

There was a seasonal move here because manufacturing lost 52,000 jobs but auto-related showed a gain of 28,000 if you adjust for the seasonality.  The two growth spots were healthcare at 17,000 and government jobs with a gain of 7,000 jobs.

It may not be much of a surprise, but just last night Goldman Sachs lowered the non-Farm Payrolls data to -250,000.

Equity futures are higher on the news.  This may just be a factor of having seen nothing but worse and worse data and being jaded over an improvement, but these numbers were different enough from estimates that it might be easy to be suspicious.  As far as we can tell, this does not add up with the data we have been seeing.  If the data is accurate, then GDP recovery is likely going to be much sooner.

JON C. OGG
AUGUST 7, 2009