Oh yea, supply. Bonds are fractionally higher this morning on a weak non-farm/unemployment report. Limiting gains is the supply factor as the Treasury will sell $73 billion 3/10/30 year securities next week as well as 10 year TIPS. Interest rates were left unchanged across the pond. Thirty-year bonds are up 6/32, yield 4.32%. Ten-year notes are up 13/32, yield 3.49%. Two-year notes are up 3/32, yield .99%.

Are the fireworks all wet for the economy? Lost jobs, workweek falls, and workers’ average hourly wages stagnation (2.7% year/year gain, the smallest gain since September ’05). Non-farm payrolls fell 467,000 in June. Expectations were for a decline of 365,000. Revisions to the previous two months added a fraction 8,000 jobs. Year/year 5.664 million jobs have been lost for its worst decline since '49. 6.460 million jobs have been shed since the recession began in December '07. Non-farm payrolls have fallen for 18 consecutive months, the longest decline post WWII. Job losses were broad based: manufacturing -136,000; construction -79,000; wholesale trade --16,000; retail trade -21,000; government -52,000; professional/business -118,000 and temporary help -38,000.

Wage fizzle? Average hourly earnings were unchanged, for its second unchanged reading in the last two months. Year/year average hourly earnings rose 2.7% vs. 3.0%. The work week fell .3% to a record low 33.0. One of the few positives, the factory work week rose .3% or .1 hours.

Unemployment rate is bad But what about the 30 MILLION “underutilized” workers? The unemployment rate rose to 9.5% vs. 9.4% the previous month. This is the highest level since August '83. Expectations were for a gain to 9.6%. The labor force fell 155,000 but household employment fell 374,000. The labor force participation rate fell to 65.7% vs. 65.9%. The augmented unemployment rate (those who would work if they could find a job) rose to 12.8% vs. 12.7%. Long-term unemployment rose to 4.381 million, up 170% from a year ago.

“How do you put together a consumer economy that works when the consumers are out of work?” House of Cards (overleveraged)…now House of Wax? The jobs report was negative throughout. The labor market continues its decline, albeit at a slower pace. The economy remains in recession which is indicative of additional job losses in coming months. Unemployment is likely to hit 11.0%...and how high will the “underutilized” workers go? All of this will act as an immense depressant on consumer spending, a negative for an economy that derives 70%+ of its growth from this. Repeat after me, “How do you put together a consumer economy that works when the consumers are out of work?”

No fireworks here. Jobless claims down…but claims above 600,000 mean higher future unemployment. Initial jobless claims fell 16,000 to 614,000 in the week ending June 27, close to expectations. The previous month was revised higher by 3,000 to 630,000. Claims are up 209,000 or 51.6% from the previous year. While claims peaked March 27 at 674,000, they have been above 600,000 for 22 consecutive weeks. Continuing claims fell 53,000 to 6.702 million in the weekending June 20. Continuing claims are up 3.550 million from the previous year or 112.6%. Claims have peaked; however, the labor market continues to be weak foreshadowing further gains in unemployment.

Should we be waving sparklers? Factory orders rose 1.2% in May. A gain of .9% was expected. This is the third gain in the past four months. The previous month was revised from a gain of .7% to a gain of .5%. Durable good orders rose 1.8% while non-durables rose .7%. Non-defense capital good orders ex-aircraft, a proxy for capital spending, rose 4.7% and is now down only 15.0% on a three month annualized basis. Shipments fell .9% while inventories fell .6%. Year/year factory orders are down 22.7%. While the decline in annualized orders has slowed, a still high level of unsold goods, deleveraging, job loss and tight credit will restrain growth. Remember 16% of all consumer fireworks injuries are caused by sparklers burning hands and legs…

Waiting for the global economy to change? Will it? A new norm in Europe? Will we be waxing the European consumer and sticking them in a wax museum in Paris next to Paris Hilton? The European Central Bank left interest rates unchanged at 1.0%. Rates sit at "appropriate" levels. The economy is expected to recover by the middle of next year making further rate cuts unlikely.

Coming attractions. Monday brings data on the ISM non-manufacturing index.