The authors chop all this together with some regression analysis and figure labor market slack will be higher by the end of this year than at any time since 1945; the outflow rate will be historically low; and the unemployment rate will be sticky. In other words, any recovery that does occur over the next year will likely be jobless and joyless.

One more thing on employment: The first Friday of every month we get the national stats. But there are also job stats published later in the month that breaks down employment by state, which sometimes give a different picture than the national view.

According to Dunne and Henwood data, 36 states reported statistically significant increases in unemployment in May, and there were no significant decreases — a deterioration from the April reports.

To give you an idea, in April eight states reported unemployment over 10%; now the number is 14. The worst are 14% in Michigan, 12.4% in Oregon, 12% in Rhode Island and South Carolina, 11.5% in California and 10.2% in Florida.

As a result of lower tax receipts from falling employment, the Rockefeller Institute reports that states are expected to make more cuts in social services at this already difficult juncture.

For a couple of months I have encouraged investors to be a bit more optimistic than the consensus because the Economic Cycle Research Institute's Weekly Leading Index, which has historically been quite accurate at forecasting business cycle upswings, has been dramatically improving. And as you can see in the latest chart above, published earlier this month, that is still the case.

Let's hope that the ECRI is right again, and that worsening employment trends, while painful to the jobless and their families, does not derail any budding recovery that might really be under way.

In the meantime, continue to treat all rallies as trades.

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