Today, the Labor Department reported that the economy added 431,000 new jobs in May, exceeding the 290,000 jobs gained in April – apparent affirmation that the domestic recovery is building momentum.  Hold the phone, however, because virtually all (411,000) of those new jobs were temporary census worker hirings.  There were some bright spots in private sector employment: manufacturing jobs grew by 29,000 and temporary services added 31,000 jobs.  But these were largely offset by a decline of 35,000 jobs in construction. 

Markets are understandably disappointed this morning, and worries of a double-dip recession will resurface. We’re maintaining our view that the recovery is intact despite the let-down that was reported today.  Month-to-month employment data are volatile, and the census noise complicates an already-difficult calculation.  The labor picture is still trending positively, and virtually every other measure (including an abundance of anecdotal evidence) is signaling continued recovery and broadening growth.   Today’s jobs number feels more like a rogue data point (or outlyer) than the start of another leg down.  Notably, recent increases in temporary employment and personal income foreshadow that, however painfully long it seems to be taking, companies will eventually require permanent employees.

Because the Labor report offered very little for optimists to trumpet, investor focus quickly shifted back to the ugly situations in the Gulf and in Europe.  When the oil leak is controlled, and (if and) when European policy-makers get serious about austerity, investors will no longer be able to ignore the overwhelmingly positive economic news that heretofore has been lost in the pessimism.