June 5 (Bloomberg) -- U.S. Labor Secretary Hilda Solis dismissed speculation that the Bureau of Labor Statistics underestimated the drop in payrolls in May, helping spur a recovery in stocks.

“The rumor was false,” Solis said today on a conference call with reporters after her department reported the economy lost the fewest jobs in eight months.

Stock-index futures surged and Treasury securities slumped in the minutes after the report, released at 8:30 a.m. in Washington, showed the U.S. lost 345,000 jobs in May. The deceleration in job losses reinforced signs the recession was starting to abate.

Concern among some traders the data might have been miscalculated erased the gains and pushed the Standard & Poor’s 500 Stock Index down 0.9 percent by 10:13 a.m. in New York. Shares recovered after Solis said the speculation was unfounded; the S&P index was up 0.2 percent at 1:46 p.m.

“There’s no effort under way to change the data which was released this morning,” Gary Steinberg, spokesman for the Bureau of Labor Statistics, said in a telephone message. “There’s no problem with the BLS data that were released.”

Labor’s estimate of the net jobs created by the formation of new companies and the demise of established firms, known as the birth/death model, fed the confusion.

220,000 Boost

The calculation added 220,000 jobs to payrolls before the figures were seasonally adjusted, 25 percent larger than the May 2008 estimate. The increase may have suggested to some observers that the government was trying to artificially boost total payrolls.

“Please remain calm,” Michael Feroli, an economist at JPMorgan Chase & Co. in New York, wrote in a note to clients. “We’d caution against jumping to conclusions about the reported 220,000 ‘addition’ to payrolls from the birth/death” model.

“This factor is always a large positive in May,” Feroli wrote in a second note. “We don’t agree with the notion that this is a distortion and we take the headline number at face value.”

“The slowing in payroll losses over the last two months is a hopeful sign that the economy is on track for a second-half recovery,” he added.

To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net

Last Updated: June 5, 2009 13:50 EDT