U.S. job market looks less sturdy in hindsight

By Pedro Nicolaci da Costa

NEW YORK, May 18 (Reuters) - The U.S. job market has held up surprisingly well despite a sharp slowdown in economic growth, but new figures from the Labor Department suggest things have not been so rosy after all.

According to the numbers, a meager 19,000 private-sector jobs were created on net during the entire third quarter of last year, in sharp contrast with the nearly half a million reported in the closely watched payrolls survey.

That means employment may indeed have suffered the brunt of the housing slump even if this retreat has yet to be reflected in the monthly government data.

For investors, the fresh evidence of weakness in employment could be viewed as a signal that a recent rally in stocks lacks a fundamental underpinning, indicating gains might peter out if the economy's tone appears to soften further.

The run-up on Wall Street has been bolstered by robust earnings and a frenzy of mergers, but also by a sense that an abrupt deceleration in the economy is merely a temporary phenomenon.

Yet the Business Employment Dynamics or BED survey, backward-looking as it may be, implies otherwise.

"Payrolls may not have been so strong after all," said David Rosenberg, chief economist for North America at Merrill Lynch. "In fact, there may have even been a month or two of declines late last year."

The BED survey looks at the number of job gains from opening and expanding private-sector businesses and the number of job losses from closing and shrinking firms.