Payrolls: Bleak with 1 Silver Lining

Karim writes:

Payrolls: Bleak with 1 Silver Lining


  • Most of the key headlines of the survey were weak
  • Payrolls up only 69k with net revisions of -49k (April now +77k not 115k)
  • Unemployment rate up from 8.1% to 8.2% (labor force up 622k and household survey up 422k)
  • Average hourly earnings up 0.1% and index of aggregate hours -0.2%
  • Median duration of unemployment up from 19.4 weeks to 20.1 weeks and U6 unemployment rate up from 14.5% to 14.8%
  • The silver lining is that the Diffusion Index (# of industries adding jobs less those cutting jobs, indexed on a 0-100 scale) rose from 56 to 59.4
  • Downside shifts were heavily concentrated in 3 sectors (Construction -5k to -28k; Retail 27k to 2k; and Business services 37k to -1k)
  • Construction and retail (which includes leisure and hospitality) likely reflect the weather payback that Bernanke has highlighted; business services cuts likely reflect the late nature of tax season this year and some of those layoffs may not have taken place until May.


  • The diffusion index improvement implies the underlying state of the labor market is somewhat better than the headline; probably in the 125-150k range
  • Purely based on the economic data, additional Fed easing is unlikely
  • But the worsening of financial conditions via Europe have increased the odds of a continuation of Twist (in its current form) for at least 2-3mths

Not to overlook the increase in the labor force participation rate from 63.6 to 63.8!

And Q2 gdp talk still about 2%.
Still looks to me good for stocks, not so good for people, though lower gasoline prices good for consumers as is weak consumption overseas.