On Friday June 5, the U.S. Labor Department will release the unemployment numbers for May. Here are some guesstimates from leading economists:

• The median of 59 estimates will show that unemployment is at 9.2%, the highest since 1983.
• The jobless rate may reach 10% by the end of the year.
• Estimates are that payrolls fell by 521,000 in May after declining by 539,000 in April.
• The median of 60 estimates showed the job losses peaked at 741,000 in January.
• The economy has lost 5.7 million jobs since December 2007.

The June Philadelphia Fed Manufacturing Index came in at -17.1 which was substantially below the -10.0 number forecasted and the -15.6 number from the previous month. This number seems to overshadow the better-than-expected Leading Indicators number of 0.1% released from the Conference board and the Initial Claims number of 381,000, which was better than previous number of 386, 000.

These numbers indicate that even though the country may be able to avoid entering a recession this year, the economy is still in a very fragile state. It may be stabilizing but shows no indication of any major improvement.

The housing downturn will continue to act as a major overhang on the economy. High oil prices continue to act as a tax on the consumer in the short term.

Although the Federal Reserve will probably not lower interest rates again in the near future unless a crisis occurs, the economic numbers above indicate that it is no position to raise rates in the near future despite inflationary pressures. The risk of sending the economy into a recession is too great. In addition, any rate increases unless they were quite substantial are unlikely to cure inflation.

In the battle between inflation and the economy, it's still the economy that rules!

Doug Roberts is the Founder and Chief Investment Strategist for ChannelCapitalResearch.com, and is the author of Follow the Fed ® to Investment Success: the Effortless Strategy for Beating Wall. He previously held executive positions at Morgan Stanley Group and Sanford C. Bernstein & Co.

The parade of economic bad news continued today when a report issued by the Institute for Supply Management showed that factory activity saw its weakest month of growth in three years. The manufacturing index fell to 51.2 in October from 52.9 last month. It was expected to tick up to 53.

Most automakers posted stronger numbers than last year, due largely to increased sales, perhaps spurred on by lower fuel prices. But then again anything would have looked better against October 2005 numbers, which were the ugliest in eight years.

General Motors Corporation (NYSE:GM) October sales were up about 17%, according to the company, on double-digit increases in its truck sales. Ford Motor Company (NYSE:F) said October sales grew 8.1%, making this the second straight positive month in terms of volume for the beleagured automaker.

Chrysler, however, the US unit of DaimlerChrysler AG (NYSE: DCX) saw a 3.2% decline in sales in October.

Analysts expected to see stronger numbers like this, but they question, however, whether they will be enough for Detroit to sell out its inventory of 2006 models. The data from the Big Three U.S. car companies regarding their unsold 2006 will be closely watched today.

Norbert Ore, who oversees the manufacturing survey and also serves as a procurement director at Georgia-Pacific Corp. told the Wall Street Journal (subscription required), "It's an indication that we've peaked and the rate of growth is slowing or will disappear for the short term." Ore also said that wood products, appliances and fabricated metals were among the sectors with the deepest declines in October.

Slowing factory activity is not a big surprise. The first indication of a slowing economy this week was released by the Commerce Department on Monday. Some economists believe that the slowdowns in both the housing and automobile sectors is starting to spread to other parts of the economy. Last Friday, the Commerce department issued a report indicating that the downturn in housing led to the slowest economic growth in the GDP in three years. U.S. constriction continued downward for the fifth straight month.

I'm sure the Fed knew all this when it decided to hold the line on interest rates in its meeting last week.