Markos Kaminis'  Instablog

Ladies, have you heard this pick up line yet? "Hi, I'm Jobless." I remember the old days when I would throw my own collateral around, proclaiming to superficial takers, "I'm a Wall Street Analyst" (stressing Wall Street). Nowadays, you would omit the term "Wall Street," as it would return a smirk or a slap to the face, alongside a comment about how you ruined someone's life. Today, you are more likely to hear the jobless line in a bar, since about one out of every ten of you is now unemployed, and even more of you are under-employed.

This past Friday, the Labor Department reported what is known as the grand daddy of all employment reports, some say, of economic reports. The data stymied traders, who first sent stock index futures climbing, only to retrench, before finally ending mixed. The confused trading was perfectly matched against a confusing Employment Situation Report that offered a bit of good news and a bit of bad.

The bad news: The unemployment rate moved to 9.4%, versus the economists' consensus forecast for 9.2%. It marked a half of a percentage point jump since April’s 8.9% rate was reported. In isolation, the unemployment rate offered more than enough reason for concern. However, it was not reported in isolation.

The good news: In the eyes of the market, the jump in unemployment was more than offset by a sharp drop in the rate of nonfarm payroll decline. Nonfarm payrolls showed the job market lost a net of 345,000 positions in May, where economists had forecast a greater loss of 530K. Furthermore, the lighter number was also well off the monthly average loss of 643K reported over the prior six month span. In contrast with the unemployment rate, nonfarm payrolls, when held in isolation, offered reason to celebrate.

The market was enthused, since the unemployment rate is a lagging indicator that will eventually follow the economy into recovery. However, the nonfarm payroll trend seemed to offer greater insight. Remember, even before directional change makes its impact, the rate of change is noticed by the market. So, once again, a less bad, bad number was greeted favorably. After all, it offers another sign that better times lie ahead.

However, before the first hour of trading had even concluded, market gurus began to question the sudden and drastic improvement. Rumors spread that the government had misreported the nonfarm payroll figure, and stocks moved lower. Skeptical economists pointed toward a heavy birth/death rate adjustment in this month’s report that acted to subdue the payrolls amount.

Even if there was no mistake in May’s reporting, we know there will be a significant negative impact in June’s numbers, due to the bankruptcy of General Motors (NYSE: GM). This also gave investors pause, since the reorganization of GM will allow management to greatly consolidate operations, including its workforce. Furthermore, the fallout extends well beyond GM, to its dealerships and suppliers.

Finally, just because fewer of us are being let go, does not mean we are finding new work (seen again in the unemployment rate). Also, the under-employed, which include folks working part-time who would rather be working full-time jobs, now sum to 9.1 million. Add those stressed souls with the depressed unemployed, and you have an unhappy group that number in the mid-teens. That underemployment has economic repercussions of its own in decreased tax revenues and personal spending. So given the mix of sweet and sour news, the market had cause for indigestion.

Disclosure: No Positions