What Seasonal Adjustments Giveth, Seasonal Adjustments Taketh Away: Non-Farm Payrolls Report

The headline Non-Farm Payroll number came in much worse than expectations, printing at +69,000 jobs added for May compared to consensus of +150,000. Benzinga's estimate was at 124,000, but as we wrote yesterday, decelerating employment indicators and increasing headwinds to corporate profits may have led to a slowdown in hiring. Further, the prior two months were revised higher, with the net revisions subtracting a further 48,000 jobs. All in all, this report was just pitiful.

It is important to note that seasonal adjustments hurt this report. In the last few months, seasonal adjustments had been adding to the headline number, making job growth look much stronger than it should have. But, what seasonal adjustments giveth, seasonal adjustments taketh away, and this is no exception. Seasonal adjustments subtracted a whopping 718,000 jobs from the establishment survey, which is an extremely significant number.

Looking at the internals, the government slashed 13,000 jobs, with 5,000 0f the layoffs coming from the federal level (with 60% of that number being related to the Postal System). In the private sector, seasonal adjustments subtracted 800,000 jobs, on top of the headline number of +89,000. All in all, this report creates more confusion than it eases. This is only adding to the market uncertainty.

The market has taken a new leg down on the news, with gold GLD spiking on the news. The dollar UUP was strong across the board except for against the Yen FXY. Treasury bonds TLT continued to rally, as the 10-year yield continued to push to new generational lows. Silver SLV rallied in tandem with gold and oil USO collapsed to 2012 lows. Brent crude also traded below $100 for the first time since September. All in all, just a dreadful reading with dreadful internals.