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08 June 2010

Did Friday's jobs data sink Monday's stock prices?

We ask that question because on Monday, 7 June 2010, at 4:57 PM Eastern Daylight Time (EDT), the Reuters news service ran a pretty remarkable headline:

Wall Street falls as Friday jobs data turns buyers off

What makes that remarkable is that Friday's jobs data was released by the Bureau of Labor Statistics at 8:30 AM on Friday, 4 June 2010. The problem with that assertion made in Reuters' headline is that stock prices have already reacted to Friday's jobs data.

The chart below shows what happened to the S&P 500 in the five trading days spanning Tuesday, 1 June 2010 through 7 June 2010:

S&P 500, 1 June 2010 through 7 June 2010 Source: Yahoo! Finance

What we see is that the market reacted to the Friday jobs data immediately, as stocks dropped 1.5% from the closing value of 1102 on Thursday, 3 June 2010 to the level of 1085 that was recorded at the open of trading on Friday, 4 June 2010. Which is to be expected, seeing as Friday's jobs data was released one hour before markets opened that morning!

Looking at the market action on Monday, 7 June 2010, we see something very different. Here, we see stock prices were largely flat throughout the day, and were even up above where they closed on Friday, all the way up until 1:30 to 1:35 PM. After which, stock prices headed south before closing the day at a level of 1050.

So it really doesn't make any sense that jobs data released before the start of trading on Friday, 4 June 2010 drove down stock prices on Monday, 7 June 2010. Whatever effect it had was largely done on that Friday, which is backed up by the content of Leah Schnurr's article, which touches on how the jobs data affected the market on Friday. And looking at Reuters' headline feed for the day, we don't see any obvious triggers for a major sell off after 1:30 PM - the headline would seem to simply be an excuse to talk about how bad jobs data affected stock prices.

So we'll bite. We took a closer look at Friday's jobs data for May 2010, specifically the household employment data, which breaks down the numbers of the employed by their age groups. Here's what we found:

Change in Number of Employed by Age Group, April 2010 to May 2010
Age Group Number Employed in April 2010 Number Employed in May 2010 Change in Number Employed
Age 16+ (Everybody) 139,455,000 139,420,000 -35,000
Age 16-19 (Teens) 4,544,000 4,438,000 -106,000
Age 20-24 (Young Adults) 12,509,000 12,818,000 +309,000
Age 25+ (Everybody Else) 122,402,000 122,164,000 -238,000

Isn't that odd? Overall, there was a net loss of 35,000 jobs in the U.S. economy. The number of jobs held by teens declined by 106,000, as their percentage representation within the U.S. workforce plunged below its previous low record for the recession to 3.18%. The previous record, 3.19%, was set in January 2010.

Meanwhile, the number of working adults Age 25 or older also decreased by 238,000.

Change in Number of Employed by Age Group Since Total Employment Peak Reached in November 2007, as of May 2010 But there appears to have been a surge in the hiring of young adults between the ages of 20 and 24 years old. The number of employed young adults grew by 309,000 in May 2010. A month that was recognized as being unusual given the large amount of hiring of temporary workers to support the 2010 U.S. Census.

We guess we know how old the typical Census temp is now! We'll close by updating our chart tracking the change in the number of employed individuals by age group since the total employment level peaked in November 2007, just before the NBER's declared recession began:

The key thing to remember is that all the Census-driven hiring activity is temporary. Without it, both unemployment levels and the unemployment rate would have been likely to have jumped upward in May 2010, suggesting that there's little "oomph" behind the economy. And that growing realization would appear to be largely behind why stock prices are falling. Even after Friday's jobs data became old news, back on Friday....

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