Why Would the Market Shrug Off a Bad Jobs Report?

One reason could be statistics. There was an alarming plunge in the number of people in the labor market. People drop out for many reasons including going back to school, retired, have given up looking for a job, etc. So, in spite of only creating a net of 35,000 jobs last month, the unemployment rate dropped from 9.4 percent to 9.0 percent. That number sure sounds better.

Another reason might be conflicting surveys. The 35,000 jobs created is from the Payroll Survey which is a survey sent to businesses. This survey is where the government gets the number of jobs created which is reported each month. By the way, the margin of error here is 100,000 jobs. The other survey is the household survey which is a telephone survey. This survey is used to determine the percent of people employed/unemployed. This survey showed a jump in employment of 598,000 jobs which measured against a reduced labor force number resulted in a reduction in unemployment to 9.0 percent.

There are a lot of other statistics that could be analyzed, but the most compelling for me is the amount of new money being pumped into the economy by the Federal Reserve: over $100 billion per month and yet GDP is only rising (or “growing”) by about $40 billion per month. Where this money is going will be the subject of another post. But, this money is levitating the economy and Mr. Bernanke said in testimony last week that until the jobs situation turns around (not sure of his definition but it’s not 35,000 jobs per month) the Fed is going to continue to pump money into the economy. If so, GDP rises which filters into the capital markets. So, what’s a bad number or two?