Looking Forward to Tomorrow's Jobs Data

Plus, more on Linux.
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SAN FRANCISCO -- The expectation for tomorrow's key (to the city? The hearts and minds of traders?) employment report is an increase in nonfarm payrolls of 205,000 (vs. 268K in June). The

Reuters

consensus estimate calls for the unemployment rate to remain steady at 4.3%, and for average hourly earnings to rise by 0.3%.

As

TSC's

David Gaffen

-- not the music guy --

reported, today's jobless claims data have some market players worried about a blockbuster employment report. Such an occurrence would almost certainly stop the market's nascent rebound in its booties, especially following today's weak productivity figures and last week's stronger-than-expected ECI data.

"If the report is strong tomorrow, you're going to get" a rate hike on Aug. 24, said a friend who happens to be a bond trader. "If it's strong enough, people are going to get worried about a 50-basis-point tightening, and the market ain't prepared for that." (Remember, you heard it here first. Unless, of course, you've heard it somewhere else already.)

Moreover, our bud -- who is currently short bonds -- scoffed at the idea proffered by some economists that recent ECI and productivity figures are not inflationary because year-over-year figures are tame.

"Don't we want to be looking into the windshield vs. the rearview mirror?" the trader asked. "I want to know, where are we going?"

Our admittedly very cynical source believes many months of robust housing data augur inflationary pressures. "When you buy a house, it costs you a load of money, but you've just started spending," he said. "You're buying everything from cocktail napkins to refrigerators. People are going to fill up their homes."

Credit Where Credit Is Due

I've been critical of

CNBC

in this column but must give kudos to Ron Insana for helping put some of the hedge fund rumors in perspective today.

Insana, who's obviously bright and well connected, noted that some of the rally in bonds was due to traders' memories of

Long Term Capital

. They believe the

Fed

will either hold steady or -- if need be --

ease

if hedge funds' faux pas warrant.

Moral hazard with your oatmeal,

Mr. Greenspan

?

PS

Speaking of

CNBC

(you knew I couldn't resist, didn't you?), many readers responded to

yesterday's unbridled

attack

on Renay San Miguel and, less directly, Steve Frank. Unfortunately for both, the vast majority supported my viewpoint.

"I couldn't agree more about Renay," writes

Michael R. Hunt

of Richardson, Texas. "He was boring as a news anchor and is worse on

CNBC

. Steve Frank is terrible. I also miss Bruce Francis and wish he would return."

Hunt then offered a unique proposition: "Let's see if

CNNfn

will trade

Lauren Thierry for Renay, Steve Frank and the

Dow Jones

boys," he wrote.

Throw in Bruce Francis for an anchor to be named later and I say, Let's make a deal, Monty.

TSC Special

Big day on the site. Such much so, we've got a rare tie for the Special. Don't miss associate editor

Dan Colarusso's

*Update* Truth Serum: FDA Squashes Aronex Application, Stock Goes Poof or staff reporter

Kevin "I'm not worthy" Petrie's

Net2Phone CEO Retains Opt-Out Clause.

The Next Wave, Revised

I hope you found

Tuesday's deviation from the norm interesting and useful. A few more thoughts on the subject:

"While

Linux

has the appeal of flexibility, Windows has the enormous power and capital of

Microsoft

(MSFT) - Get Report

behind it in providing a very solid and well-established support infrastructure," emailed

Eric Wells

, an ex-Softee now with

Softagon

, a San Francisco (!)-based developer of software design and development solutions. "If an IT manager installs Linux on a desktop or a server, who does he

or she call for bug fixes or service releases -- and if there is someone to call, what will the response time be? I'm not saying that Open Source initiatives will fail -- I just don't think they will be taking major corporate and end-user market share."

Although Linux is just one example of Open Source development, Wells raises a good point. For Open Source to really take hold (much less unseat Microsoft) it has to overcome a classic

Joseph Heller

: Open Source products must prove to be stable and well supported, which won't be the case until corporations embrace them. That, of course, won't happen until corporations feel they're safe.

Meanwhile,

David E. Lilienfeld

of Columbia, Md., wondered "how much in favor of open sourcing

Oracle

(ORCL) - Get Report

would be if its source code were suddenly 'open sourced.' Everyone who believes in open sourcing seems to think that software should be free, but few are ever willing to take the thought to the next level, i.e., that the hardware should be free, too."

That sends me spinning off into a tangent about this idea that free PCs are "good" for

Intel

(INTC) - Get Report

, as was bandied about recently. Then there's today's report in the

Journal

about Microsoft planning to attack

America Online

(AOL)

with free (that's synonymous with "no cost") Internet service.

A few years ago I came across an analyst who touted a "crazy" theory PCs were in the throes of an inexorable decline (Roxanne Googin, whom I couldn't reach today). Obviously, she was way early in terms of the stocks, but it's looking like she was right on the money in terms of

PC prices. Surely Intel, Microsoft, AOL,

Dell

(DELL) - Get Report

and other biggums will survive the price-slashing storm.

But look at

Amazon.com

(AMZN) - Get Report

or

Compaq

(CPQ)

to get an idea how Wall Street treats companies that either overspend or can't keep growing as fast as expected.

Free PCs and nose-diving prices can't

help

a company whose revenue growth is dependent on those markets. Unless, of course, the laws of economics really have been repealed.

One more thing to keep in mind as you watch the landgrab for eyeballs: When was the last time

you

clicked on a banner ad? What happens to the revenue streams of sites (including this one) that depend on advertising when advertisers realize nobody is "clicking through"?

Hopefully I'm wrong. Maybe, I'm missing something (and I'm sure you'll email me to share). All I know for certain is I suddenly feel the need for a drink.

Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at

taskmaster@thestreet.com.