The U.S. may have lost jobs last month, one Wall Street strategist says

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It felt like a bit of a catch-up on Monday, with the Dow?DJIA ?outperforming the S&P 500?SPX ?which outperformed the Nasdaq Composite?COMP .?In any event, it broke a four-session losing streak for the S&P 500, though the August gremlins might be back out on Tuesday. More on that later.

But for the call of the day we’ll go way back in time to Friday — ancient history — when the Labor Department reported 187,000 jobs were created in July. Steve Englander, head of North America macro strategy at Standard Chartered, has been something of a jobs-report skeptic, previously noting the divergence between the payrolls report and the quarterly census of employment and wages. (The most recent data, from December, shows the payrolls report with 2.2 million more jobs than the more authoritative, but less timely, QCEW report does.)

What Englander finds fault with in the July report is the birth-death model. Each month the government surveys 122,000 businesses and government agencies, covering about a third of all workers, to come up with the job numbers produced by what’s called the establishment survey. But new companies pop up, as well as fail, all the time. Hence the birth-death model fills in the gap with its estimate for job creation or destruction each month.

Englander for these purposes is looking at the non seasonally adjusted numbers, which showed 182,000 private-sector jobs created in July. The birth-death model was responsible for 280,000 of them, which means existing companies got rid of 98,000 positions.

“The behavioral question is whether it is plausible that optimism on economic prospects led to many jobs being created at newly established firms when ongoing businesses were contracting. The BLS’ business employment dynamics data, which is based on administrative data rather than a model, tells us this is very unlikely. As is intuitive, job creation from new and existing firms tends to move together. This is the basis of our suspicion of excess animal spirits at BLS,” he said.

MarketWatch’s examination of the numbers does find months that the private-sector job creation of new companies is positive when existing companies are reducing workers, but it isn’t normal — five out of the last 27 reports when January figures are excluded.

Englander says the figures may be overstated by as much as 200,000 — and applying seasonal adjustment would leave private-sector job creation down by nearly 30,000. If he’s right about the overstatement, this also implies job openings data could be awry, since that report uses the headline payrolls data for alignment. And he says when the average of 12 months of private payrolls excluding births and deaths are near current levels, the average 12-month birth-death adjustment has been 35,000 to 60,000 jobs lower than it is now running.

The markets

A risk-off tone seems to be the flavor for Tuesday. U.S. stock futures?ES00,?-0.84% ?NQ00,?-0.93% ?were lower, oil futures?CL.1,?-2.11% ?dropped, and the yield on the 10-year Treasury?BX:TMUBMUSD10Y ?was back around 4%.

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