Investors wouldn't know it from the brutal sell-off in the markets Friday, but the May jobs report released at the end of last week offered more hopeful signs than it's getting credit for.
The disappointing gains in private-sector employment -- the 41,000 jobs added fell far short of the 150,000 many analysts had forecasts -- rocked investors' hopes for a broader economic recovery. Given the sharp hiring in prior months and awkward touting by the Obama administration ahead of the results, expectations had steadily ratcheted higher.
But investors need to look at the bigger picture behind the anemic headline numbers. While far below the often-inaccurate economists' forecasts, those job gains took place during one of the most horrid Mays for the stock market in recent decades. Given the month's stomach-churning volatility, it's understandable if many employers veered towards caution when making hiring decisions.
That's especially true when the reasons for the markets' swoons are taken into account. A debt crisis in Europe that generated no shortage of comparisons to the collapse of Lehman Brothers in 2008 and the subsequent flight to quality were the primary forces hammering the markets. Given the credit freeze that followed that downturn, employer skittishness is natural even if the comparisons to Lehman are vastly overblown.
Census Gigs: Temporary, but Relatively Well-Paying
And the arguments making the rounds that the Census's heavy hiring took a direct toll on private-sector job growth have a lot more validity to them than dismissive bears would like to admit.
"I'm hearing a lot from Wall Street houses that the reason why private payrolls were so weak was because the government borrowed jobs from the private sector, and that when the Census ends, these workers will migrate to the private sector," wrote high-profile doomsayer David Rosenburg of Gluskin Scheff in a note to clients. "There are a lot of reasons why this makes no intuitive sense and one of them is simply that nobody in their right mind would take a temporary government job doing the census over a full time job [with benefits] offer in the private sector."
But Rosenburg's argument overlooks the relatively generous wages that Census work pays. Hourly rates in New York City, for example, come in around $18.75 per hour. That is more than 250% higher than local minimum wage of $7.25.
Moreover, some people who took census work over longer-term options may see it as a form of civic service. One census worker going door to door, for example, said "making a contribution to democracy" was one of the reasons he opted for the job.
Little Tweaks to Behavior Add Up
Some bulls make a more convincing case for how to interpret the data than their bearish counterparts. Brian Wesbury of First Trust Advisors calculates that even seemingly minuscule gains in average weekly hours from 34.1 to 34.2 add up to big numbers. "Had employers kept hours per worker unchanged, there would have been enough labor demand for private payrolls to increase 356,000" rather than the paltry 41,000, he has said.
That's much more consistent with the spike to 16-month highs for job openings that the Labor Department announced Tuesday than the sudden collapse in a fragile job recovery that the bears are advocating.
Investors would be wise to consider the many factors coloring May's job report, then, before declaring the month an outright failure.
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