Wall Street Greek: Unemployment Rate Jump Outweighed by Better Payrolls

Visit the front pages of Wall Street Greek and Market Moving News to see our current coverage of economic reports and financial markets.

May's jump in the unemployment rate was outweighed by a lighter nonfarm payroll loss. Stock index futures moved higher as a result.

(Tickers: RHI, MAN, KFY, DIA, SPY, QQQQ, NYX, DOG, SDS, QLD, XLF, IWM, TWM, IWD, SDK)

Unemployment Rate Outweighed by Payrolls

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 highly 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.

Employment Situation Report

Today's take on May employment offered a little good and a little bad news.

The bad: The unemployment rate moved to 9.4%, versus the economists' consensus forecast for 9.2%.

The good: 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.

We told you in our "Week Ahead" copy that the unemployment rate would likely exceed expectations. Specifically, we noted, "Ongoing unemployment claims have persisted in their ascension, and so I think economists are making a mistake here."

Still, there was a powerful surprise within the monthly report, at least on the surface of things. Nonfarm Payrolls came in down only 345K in May, where economists were forecasting a job loss of 530K. 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 await us.

Raising suspicion about this sudden improvement, talking heads are pointing toward a heavy birth/death rate adjustment that acted to subdue the payrolls figure. Thus, there could be a later adjustment to this month's number when June's Employment Situation is reported (this would follow trend as well). Also, the under-employed now sum to plus 16%, and that impacts tax revenues and personal spending. We have not even mentioned the newly unemployed at General Motors (NYSE: GM), associated dealerships and impacted suppliers. So, while green shoots are sprouting, a frost might subdue them in June's figure.

Consumer Credit Report

At 3:00 p.m., we will receive the Consumer Credit Report. Economists see another contraction in consumer credit, this time by $7.0 billion. Credit contracted by $11.1 billion in March. This is an inevitable event, as credit card issuers come under regulatory pressure and face the reality of rising default rates... and the hangover from decades of free money is going to last a while.

Corporate Earnings Drivers

The light EPS schedule includes news from Agilysys (Nasdaq: AGYS), American Woodmark (Nasdaq: AMWD), Exide (Nasdaq: XIDE), Oil-Dri Corp. of America (NYSE: ODC) and that giant of industry, Carphone Warehouse (Nasdaq: CPW).