By now, you’ve probably heard about the horrific May jobs report that exacerbated the global risk asset sell-off.
Analysts are scrambling to figure out if this was a noisy one-off that we can blissfully ignore, or if it’s something more serious.
There’s some chatter among Wall Streeters that we may be able to go with the former. And it has something to do with what Art Cashin describes as the Lehman distortion.
Basically, when Lehman Brothers went bankrupt in 2008, the effects were so devastating that it distorted all of the seasonal adjustments that we’ve come to accept in the monthly jobs data.
Cashin wrote about it in his Cashin’s Comments before the release of this morning’s disappointing May jobs report:
Will Lehman Affect Payroll Data? – The mainstream media refers to it as the summer slump. Over the past two years, firming economic data from October through April has tended to suddenly soften and weaken over the next several months.
That phenomenon has been attributed to everything from warm winters, to currency shifts or even cycle shifts.
In Wall Street watering holes, there is a small coterie who contend it may be the aftereffects of the Lehman failure.
The theory claims that the effect on the economy after Lehman failed in September of 2008 is that it may have distorted seasonal adjustments in 2010, 2011 and, maybe, even now.
There are no scholarly papers on the thesis that we know of, but the contentions continue.
The thinking is that the negative impact on the data from October 2008 through April/May of 2009 was so devastating that when it was factored into the adjustment data for subsequent years, it warped the data, causing larger than normal adjustments for those months…