Following a week with some encouraging economic news – though it was buried behind the headlines – there will be little ambiguity in the week to come with reaffirmation of economic woes, specifically in the monthly employment report out next Thursday (a concession to Friday’s July 4th holiday).

Let’s start with – and perhaps briefly enjoy – the good news. The Case-Shiller index reported last Tuesday showed home prices dropped 1.4% in April in the 20 cities tracked by the index, the smallest drop since October. More significantly, values rose in eight cities, up from two in March. And, in the 12 cities in which values did not increase, only two experienced steeper declines than in March.

One of the key ingredients to a housing recovery will be price stability. Buyers remain reluctant to jump into a market as prices continue to drop. The Case-Shiller data showed some slowing in price declines and was confirmed two days later when the National Association of Realtors reported the median price of an existing single-family home rose in May for the third month in a row – contributing to an increase in home sales.

The more stable values could be beneficial for mortgage refinances and the broader housing-finance industry with homeowners seeking cash and trying to get out from under re-setting adjustable-rate loans. Those refinances – both categories -- were threatened by plunging home values. Indeed, last Wednesday, the Mortgage Bankers Association reported the refi share of all applications fell to 36.3%, its lowest level since last July 2007.

The other bits of potentially good news were buried in confidence reports issued Tuesday by the Conference Board and Friday by the University of Michigan. While both reports showed the headline number measuring confidence approaching record lows, a computation using some of the other indexes – measures of expectations and current conditions -- was optimistic. In the case of the Conference Board index, expectations make up about 60% of the total index. One way to look at both reports is to subtract the assessment of current conditions from expectations. A positive result would mean survey respondents feel better about the future than they do about the present and thus would feel less of a need to save for a rainy day. Such an attitude would encourage spending (and borrowing if banks were willing to lend), critical pieces in a consumer-driven economy. The difference in both the Conference Board and University Michigan surveys is negative, but the gap has been narrowing for four straight months in the Conference Board survey and four of the last five months in the Michigan index. Historically, a narrowing of the current conditions – expectations gap signals an improving economy.

But, that was last week and the upcoming week may not contain positive surprises – even if the reports are distributed with magnifying glasses -- especially Thursday’s employment report detailing changes in payrolls, employment, unemployment and the unemployment rate.

Last month’s report surprised not merely with a sharp jump in the unemployment rate – from 5.0% in April to 5.5% in May, but with a plunge in the number of people with jobs (down 285,000, the sharpest drop since last August) and a sharp (861,000) increase in the number of people unemployed (by definition, out of work and looking for work). According to Randy Ilg, an economist with the Bureau of Labor Statistics, writing in the BLS’ “Issues in Labor Statistics,” the increase in the unemployment rate and the number of people unemployed through most of 2007 “was due to reduced flows out of unemployment rather than increased flows into it.” In other words: People without jobs were unable to find jobs. “From December 2007 to May 2008, however,” Ilg wrote “the increased likelihood that employed individuals and new and returning entrants from outside the labor force would become unemployed largely contributed to the rise in unemployment.”

Ilg’s analysis – and the likelihood Thursday’s employment report will not be good – is supported by the steady uptick (on a trend basis) in new claims for unemployment insurance, exacerbating the steady rise in continuing claims for unemployment insurance.

Thursday’s report – whichever way it goes – could have an odd impact on markets, coming as it does on the eve of a three-day holiday weekend. Even with the scheduled early close of markets, many experienced Wall Streeters are likely to get an early start on mini-vacations, leaving transactions to less-experienced traders who could over-react to the data report.

Mark Lieberman is the senior economist for the Fox Business Network. Prior to joining FOX, he served as first vice president at Washington Mutual, where he was manager of economic analysis and research. Before that, he served as senior vice president at Dime Savings Bank of New York (which was later acquired by Washington Mutual), where he specialized in credit and risk management. He has a degree in Economics from the Wharton School of the University of Pennsylvania.