Photo: Bloomberg TV
What!?JPMorgan’s equity strategist Tom Lee — known in the biz for being steadily bullish — is out with a report saying that the whole bad jobs report, which freaked the heck out of the market, might actually be a result of bad seasonal adjustments.
The title of his note: Seasonal Adjustment Wrong? May Payroll Gains (NSA) Best Since 2000
Why does he think that the number was wrong?
- First, on a non-seasonally adjusted basis the Establishment Survey (which is what’s used for the official new jobs number) came in at +800K, one of the best numbers of the decade.
- The alternative household survey, also not seasonally adjusted came in at +732K jobs and was THE best since 1999.
- Finally he notes that the Citi Economic Surprise Index is following familiar seasonal patterns (tumbling in the spring and troughing in the summer) suggesting that season effects on data is dominant.
His bottom line: The US market is now getting very cheap, with some kind of bottom coming in the next two months. Any possible driver, such as ongoing housing improvement, some action in Europe, a strong tilt towards Romney in polling, and China stimulus could put stocks into overdrive.
We doubt anyone will be convinced at the moment until there’s more vindication. Still! We like the contrarian-ness.