Wall Street questions June jobs data after hospitality drop

A weak June payrolls report has drawn skepticism from Wall Street after the U.S. Bureau of Labor Statistics said leisure and hospitality employers cut 61,000 jobs during a month of World Cup activity. The dispute matters because investors and economists rely on the first payrolls estimate to judge labor demand, even though the BLS later revises the figures as more survey data arrives.

The BLS reported that the U.S. economy added 57,000 jobs in June, according to Fortune. That was about half of what economists had expected, Fortune reported, with the hospitality decline standing out to several analysts as the most surprising part of the release.

Jamie Cox, managing partner at Harris Financial Group in Richmond, Virginia, told Fortune he viewed the June figures as misleading and expected later revisions to raise the estimate. Fortune said Harris Financial Group manages $1.3 billion in assets.

Cox pointed to the World Cup as the reason for his skepticism, Fortune reported. He said he did not believe leisure and hospitality employment would fall while the tournament was drawing activity tied to hotels, bars and restaurants.

World Cup spending complicates the jobs picture

Pimco economist Tiffany Wilding told Fortune that leisure and hospitality had been expected to get a hiring lift from the World Cup. EY-Parthenon Chief Economist Gregory Daco also told Fortune the 61,000-job drop was the report’s most glaring weak spot, though he did not say the number was wrong.

Bank of America Institute data cited by Fortune showed card spending rose 5.4% from a year earlier during the World Cup group stage. Liz Everett Krisberg and David Tinsley of Bank of America Institute told Fortune the increase was driven especially by visitors coming into match cities, with spending by non-locals up 17.4%.

RSM Chief Economist Joe Brusuelas told Fortune the jobs report should be treated cautiously. He said he expected the top-line June payroll number to be revised upward when July data is released.

The Financial Times also focused on the hospitality decline as a possible reason the payrolls report missed expectations, Fortune reported. Robert Armstrong wrote for the Financial Times that excluding the sector’s losses would leave a stronger four-month trend.

Revisions are part of the payrolls process

Fortune reported that skepticism about first-run payrolls data is not unusual because the BLS publishes revisions after additional responses and data come in. A Pantheon Macroeconomics chart cited by Fortune showed that revisions can be sizable and have often moved lower over time.

Paul Donovan of UBS told Fortune that the report was a reminder not to place too much weight on one unreliable data release. He said revisions and seasonal adjustment swings affected the details, while the broader trend remained one of companies hesitating to add workers but not rushing to cut them.

The debate leaves economists waiting for later BLS updates to determine whether June’s hospitality drop reflected real weakness or a statistical distortion. For now, according to Fortune, the headline payroll gain and the World Cup-era hospitality losses have made the June report harder for some Wall Street analysts to accept at face value.

This story draws on original reporting from Fortune.