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Gauss said it best:

But you shouldn't save files in JPEG, because it uses a "lossy" compression. TIFF is a better choice

Nor should you work with a jpg file at all. The format is meant as a final save for the web, not as a file you should flip, rotate, filter, color correct, twirl, squeeze or otherwise torture its pixels  The JPG format is lossy, which means exactly what it says. And every time you do something to a JPG file, it does the best it can...really.....but there's only so much it can do.

My GUESS of what's happening here, is that the format is trying to accommodate you, but simply cannot. You're asking something of it that it wasn't meant for, and when you do that to any image file, it can do strange things

Like Gaussian said, grab the original file, if you have it. Save as a tiff (or .psd) Play around with it then. Never play around with a jpg file.