Why a horrible jobs number didn't tank U.S. stocks this morning
06/03/2011 12:01 pm EST
Total nonfarm payrolls grew by just 54,000 in May. That’s down from 232,000 in April and more than 100,000 below the consensus among economists, according to Briefing.com of 169,000.
Take out the noise from layoffs in the government sector as state and local governments cut their workforces to respond to real or created budget shortfalls, and the number was still ugly. Private sector payrolls grew by just 83,000 in May. That was far below the 268,000 private sector jobs added in April and the consensus projection by economists of 180,000.
The official unemployment rate edged up—again—to 9.1% in May. It had been 9.0% in April and 8.8% in March.
So why, at 11 a.m. New York time was the Dow Jones Industrial Average down just 0.54% and the Standard & Poor’s 500 stock index down just 0.5%?
Partly because, as I wrote yesterday, the big sell off on Wednesday priced some of this bad news into the market.
Partly because the jobs numbers aren’t as negative for the future of the U.S. economy as the plunge in job creation might have been. Income growth was amazingly strong given the small number of jobs created in the month. Average hourly earnings were up by 0.3% in May. That’s actually better growth that the 0.1% increase in April Total earnings also grew by 0.3%. My suspicion is that what we’re seeing is companies deciding not to hire because of uncertainties in the economy, but finding current business good enough to have to give current employees more hours of work and to raise pay very modestly for existing workers. The average workweek held steady in May at 34.4, the same level as in April. Both months were up slightly from the 34.3 hours in March. With income growth holding steady, it’s hard to see consumer buying falling off a cliff. And without that kind of drop in consumption business revenue should remain in decent shape.
And partly, a bigger part, because of relatively good news out of Europe on the Greek debt crisis this morning. (Remember what a low bar “relatively good news” is in that crisis). That, along with the weak U.S. jobs number, has pushed the dollar down and the euro up. That’s produced some modest gains on European stock markets (the German DAX index is up 0.54% as of 11 a.m. New York time) and helped support the prices of commodities (Brent crude is down just 0.67% and copper is actually up 0.87%) and of commodity stocks (shares of copper miner Freeport McMoRan Copper and Gold (FCX) are up 0.3%.)
The good news on the Greek crisis, which has pushed the euro to a one-month high against the dollar, is a report from the Greek government that a review of Greece’s financial progress by the European Union, International Monetary Fund, and European Central Bank, had ended “positively.” A good report on that review is a requirement before Greece can get the next $17 billion drawdown of rescue financing.