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Economic Calendar - How Much Worse Could Next Week Be?

You likely already know what jump-started Friday’s implosion, but just in case, it was a very weak job creation number for May. A total of 431K nonfarm payrolls were added, versus the anticipated 500K. Of that 431K though, 411K were temporary census workers; only 41K of them were permanent private sector jobs. [No, the math doesn't quite add up, because the Bureau of Labor Statistics factors in other numbers besides the ones they post.]

A legitimate reason for a selloff? Maybe, but it’s an interesting case study for trading psychology….

Expectations mean everything. The fact that it was the fight straight month we saw net growth in jobs in the private sector (never mind the census workers) wasn’t compelling. The lower unemployment rate was no help either; it fell from 9.9% to 9.7%. Yet, that number was viewed as tainted too, as investors and pundits were quick to cite that the actual labor pool - a self-appointed designation - shrank, thus inflating the number of ‘employed’ people.

While that data was the biggest news from last week, it wasn’t the only news - construction spending and pending home sales were both up, by 2.7% and 6.0%, respectively. As we said last week though, this may be at least partially the result of some last-minute capitalizing on the now-expired tax credit.

Continuing unemployment claims were up, while new claims were down.

Economic Calendar

Economic Calendar - 06/06/10

Economic Calendar - 06/06/10

As for the coming week, it should prove far less dramatic. Consumer credit is due on Monday; analysts expect a decrease of $2.0 billion after last month’s $2.0 billion increase. Retail sales are coming out on Friday. Total retail activity should be up 0.2%, but when autos are taken out of the equation, experts are looking for a modest 0.2% dip for last month.

It will be interesting to see just how hard the market works to see the glass as half full or half empty in the shadow of Friday’s mess.

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James Brumley is a freelance writer and registered investment advisor. He began his career as a broker with a major Wall Street firm, where fundamentals and long-term holding periods were core strategies. After that, he switched gears completely, becoming an analyst at a short-term trading newsletter that focused on technical analysis. He now manages client money using the best of both philosophies. His company, Bluegrass Portfolio Management, offers investors an opportunity to reap superior returns with minimized risk.