NEW YORK, NY

Check me out this week as I host "Cavuto" on the Fox Business Network at 6:00 pm EST

I've said it before but it's worth mentioning again...today is the day we have been waiting for since the last employment report was released. A fair amount data has gone under the dam since then, and for the most part, there has been little to cheer about. There has been anxiety over the numbers and the sinking feeling that things could take longer to get better. Moreover, a few days before the celebration of the birth of our nation more and more people are wondering if this land of the free will fall prey to the kind of rule from which the Founding Fathers and colonists fled in the first place. Also, there is confusion over the game plan for recovery and when the focus shifts to Main Street. This morning, one of the big news items is a report of a massive pay hike at Morgan Stanley (MS), which goes along with a similar report on Goldman Sachs (GS) last week. As MC Hammer might say: Bonus Time!

My Capper from "Cavuto" Last Night

This isn't the first time that California has resorted to IOUs. But let's face it, there is something frightening about this happening in the richest state in the land. I closed last night's show with the following observations:

"It would be funny if it wasn't so sad but what's going on in California is a modern-day Greek tragedy. Unable to reach an agreement on how to tackle its $24.0 billion budget shortfall the state is resorting to IOUs. It's really interesting because it reminds me of the old "Popeye" cartoon series and the loveable loser Wimpy.

You may remember Wimpy who was always bumming hamburgers from people and letting them know they would get paid back on "Tuesday." For years, those that lived outside the golden state thought of it as more Popeye, a clean living, vegetable -eating state always looking to do the right thing. As it turns out the state thought reckless spending was the right thing.

A basic rule of state spending is that budget increases should be equal to population growth plus inflation. In the case of California, where the state budget surged almost 100% between 1998 to 2008 annual spending increases should have been limited to 4.83% but instead averaged 6.75%. So the state, blessed with the eighth largest economy in the world, is now as broke as any third world nation. Not so comical.

Instead of doing the right thing, such as cutting back spending which would have the same affect as spinach on the economy, many politicians are trying to force higher tax hikes. Arnold was once in charge of the president's council on physical fitness but he lost his way chasing polls, popularity, and fluke fiscal fitness. Now, he is being cast as Brutus in a battle to get through this crisis as it intensifies.

There is a cautionary tale for all of us in this sad saga. Reckless spending on things that sound right may actually lead to economic disaster. I never understood why all the fuss over Olive Oyl, and I don't understand why our federal government is spending recklessly in a way that seems like it can only end in economic ruin

It's all I can stand...I can't stand no more"

One area being watched very closely is autos. Our auto analyst, Dave Silver, weighs in on our website www.wstreet.com... here is an excerpt.

June Auto Sales: Sales Look like Perfect Example of Green Shoots
David Silver, Auto Analyst

"For our May auto sales update we commented that the "green shoots" we saw looked more like weeds than anything else. June's results are a new breed of grass, a hybrid of grass and weed that require the perfect balance to turn into grass, otherwise, we are destined for more weeds. Ford (F) was the clear winner of the month, reporting only a 10.9% sales decline compared to June of 2008. However, the biggest negatives that we saw were again from General Motors and Toyota (TM), which saw sales declines of 33.0% and 32.0%, respectively. Much of the talk from the Street before the industry released its results was that the industry seasonally adjusted annual rate of sales (SAAR) would increase to above 10.0 million units for the first time since December 2008. That, however, did not come to fruition, as SAAR was 9.69 million vehicles, down from 9.91 million in May but still up from earlier in the year. January marked the first time in 26 years that SAAR slipped below the 10.0 million mark; between the years 2000 and 2007, auto sales averaged 168 million units. Every automaker (not just Chrysler and General Motors) has been cutting production to try to become profitable with a 10.0 million unit market in the United States, and while many of the companies are much closer, the entire industry would still lose money with that size of a market.

Chrysler went into bankruptcy and re-emerged as "New Chrysler", and is again producing cars. The silver lining is definitely the fact that many dealerships (of the 789 that were not closed) were running on only a few days of inventory and many of the hotter selling vehicles were sold out. The first seven plants reopened June 28 (six in the United States), while General Motors is trying to follow a similar path and has idled many of its plants during its bankruptcy proceedings. Speaking of which, does anyone else realize that Fritz Henderson, CEO of General Motors, has issued more ultimatums and threats than months he has been at the head job? While the situation may be dire, the boy keeps crying wolf that liquidation is the only way. Another interesting little tidbit about the General Motors saga is that both the administration and management are trying to push around the courts. Don't you just love checks and balances, I know I do. "

Today's Session

I said yesterday that the Street was too optimistic about the jobs picture. I'm not totally surprised that Wall Street economists set themselves up for the big miss on the actual employment results. Ironically, if there had been a more conservative and realistic approach we'd be cheering that the number came in below the estimate of 550,000 and below half a million for the second consecutive month. This is how the game is played, and I think that Wall Street was swinging for the fence hoping last month was a game-changer. It was a foolhardy assumption, however.

> The only silver lining was that the unemployment rate only climbed to 9.5%
> 467,000 net jobs lost
> 6.5 million jobs have been lost since the recession began
> Government shed 50,000 jobs

I'm not so sure that the market will crumble today. There are headwinds in the form of the jobs report and three-day holiday weekend. I had a great conversation this morning with Al Angrisani, famed corporate turnaround specialist, and he believes that it's clear businesses are stuck. They aren't sure what to do right now. There is healthcare reform, cap and trade, more regulations, and so many other things. Until the coast is clear there will be a lack of hiring, a lack of business loans, and a lack of consistency. I'm inclined to agree wholeheartedly.

So even with all of that I think that the market could hold; the fact is that it must hold. For the S&P 500, the key number is 880.0.