The jobs report, briefly

June 5, 2010 in Economics,Finance

It's become poor form to take the jobs report at face value, and every financial blog out there is doing its best to reveal "the truth" about the misleading numbers. Most recently, the headline is that the 431,000 jobs which were added to non-farm payrolls included 411,000 temporary census-related jobs. Quick arithmetic reveals that this means only 20,000 jobs were actually added.

Should the market care?

The market doesn't respond to the number of jobs. Instead, it responds to the difference between the reported number of jobs and the market's expectation. A jobs report of 50,000 could result in either a massive rally or a crash, depending on the expectation. Here, 536,000 jobs were expected to be created, so the market should fall whether it was 431,000 or 20,000 - both miss the mark (albeit by different amounts).

But we all get that the government numbers mess with our employment perception, that's established. What I really want to know is if the 536,000 jobs that were anticipated already included the 411,000 government jobs? I would expect that they did, because those forecasters aren't doing their jobs otherwise, in which case it is wrong to compare the survey result to the 20,000 number. Both should include the government boost. However, if forecasters were slacking off - and who knows, they may have been - then it would indeed be correct to point out the emperor's missing jobs.

And now back to your regularly scheduled market crashes.

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