Disappointing June unemployment data forced tax-exempt bond prices 1/8 point lower Friday, but traders said that it would have been much worse if desks were fully staffed and investors were back from the Independence Day holiday.

"It's silly for us to be in today. We're just looking at the screen and watching the government bond sink, and there's nothing we can do about it," a veteran trader reported early Friday afternoon.

The 30-year government bond was down 3/4 point in early afternoon trading, but there was virtually no liquidity in the tax-exempt market, according to the few traders who could be found at their desks. "I guess we'll just play catch-up on Monday, but by that time prices could be going in the opposite direction," the frustrated veteran moaned.

Although the unemployment rate rose 0.1-point, to 7.0%, and non-farm payrolls fell 50,000 -- much more than expected -- there were enough positive figures in the report that disturbed economists and traders. The May nonfarm number was revised upward to 119,000 from 59,000, the average workweek was up 0.02 hours to 34 1/2 hours, and average hourly earnings increased 0.6% to $10.38.

Michael Moran, chief economist at Daiwa Securities America Inc., said Friday that the averrage work week and index of hours worked figures -- up 0.5 hours -- were convincing evidence that the economy was already on the mend.

It is now two months in a row for each category, and this is generally the "first step in an economic recovery," Mr. Moran said. He suggested that the recession came to an end in May.

For the most part, Mr. Moran felt that inflation is under control, but found the four consecutive months of increases for average earnings "bothersome." Nevertheless, he predicted that consumer prices for the year would average about 4%, or slightly lower.

Against this background, Mr. Moran does not see the yield on the 30-year government bond getting any lower than 8.04%. He predicted that rates will move up in the third quarter, reaching 8.60%. And for the fourth quarter, he suggested that the 30-year yield could hit 8 3/4%.

Most of the activity in Friday's market revolved around trading in last week's $1.2 billion New Jersey tax and revenue anticipation notes that were released from syndicate prices restrictions in the morning.

Right after the break, the notes were quoted at 4.72% bid, 4.65% offered, but after trading at 4.70%, they tightened to a 4.71% bid, 4.70% market. They were formally offered last week at a 4.60% return. The issue was still trading at a profit, however, with the break-even point around a 4.76%.

The notes, rated MIG-1 by Moody's Investors Service and SPI-plus by Standard & Poor's Corp., were formally offered last Wednesday at 4.60%.

In the short-term secondary market, New York State March tax and revenue anticipation notes were quoted late in the day at 5.19% bid, 5.14% offered with the December Trans at 4.65% bid, 4.50% offered. The market for Los Angeles County Trans was at 4.65% bid, 4.58% offered.

In dollar bond trading, New Jersey Turnpike Authority 7.20s, due 2018, were still holding on to a one-point gain on the week because of the announced refinancing of all Turnpike Authority debt. Late Friday, the 7.20s were quoted a 102 1/2-103 to yield 6.99% to the premium call in 1993 and 6.68% to the par call in 1999.

In other dollar bond activity, Florida State Board of Education 7 1/4S of 2023 were being quoted at 101 3/4-102 1/4 to yield 6.98% to the June 1, 2004 par call. New York LGAC 7s of 2016 were at 95 3/8-5/8 to yield 7.39%; Metropolitan Seattle 6 7/8s of 2031 to yield 7.18%; and South Carolina Public Service Authority 7.10s of 2021 at 98 3/4-99 1/4 to yield 7.16%.

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