NEW YORK (CNN/Money) -
Friday's jobs report probably will be good news, maybe the best in nine months, but it won't mean the long-suffering U.S. labor market is completely out of the woods -- though the clearing may finally be in sight.
The Labor Department is due to report October's unemployment rate and change in payrolls Friday morning. Economists, on average, expect unemployment to remain at 6.1 percent and that payrolls outside the farm sector grew 65,000 jobs, according analysts surveyed by Briefing.com.
Payroll growth of 65,000 would be the highest since January, when 158,000 jobs were added. In fact, October's payroll growth could be a lot higher than 65,000, some economists believe.
"Net net, we think the risks are tilted toward a surprisingly strong gain in [Friday's] report," UBS Warburg chief economist Maury Harris said.
UBS Warburg this week boosted its forecast for October payroll growth to 125,000, from an initial estimate of 50,000. The firm said the hiring of replacements for striking California grocery workers will add about 40,000 jobs, and that other recent reports point to an upside surprise.
For one thing, weekly jobless claims have been moving downward. Thursday's big drop in claims came well after the Labor Department finished the surveys that will produce the October numbers, but it's at least a sign those numbers were heading in the right direction.
"Even though it falls outside of the survey period, it may be that an individual found a job during the survey period and so didn't have to file a claim in the following weeks," said Anthony Crescenzi, bond analyst at Miller Tabak & Co. "It tells a story about labor demand and suggests that has improved."
For that reason, Crescenzi said, the Treasury bond market is anticipating a possible upside surprise in Friday's payroll figure for the first time "in several years."
And recent surveys from the Institute for Supply Management, closely watched by economists for trends in business activity and confidence, have had better news on hiring.
Though the manufacturing survey showed factories still laying workers off, the pace of job cuts has slowed. And surveys of the service sector -- which employs more than 80 percent of all U.S. workers -- have shown employment gains in four of the past five months.
"We should be seeing better job reports in the next few months, and that could start on Friday," said Joel Naroff, president and chief economist at Naroff Economic Advisors in Holland, Pa.
Drop in unemployment still distant hope
Job growth is crucial for the health of the economy, which has lately recovered from the swoon it experienced around the time of the U.S.-led war with Iraq.
Though the economy grew at the strongest pace in nearly 20 years in the third quarter, it still managed to lose 41,000 jobs. Ongoing job market weakness would stunt wage growth, which would hurt consumer spending -- fuel for two-thirds of the world's biggest economy.
Consumers have been heartened by recent signs of spring in the job market -- their confidence has stabilized and their view of the labor market has improved -- but only slightly.
More than a third of the 5,000 consumers surveyed last month by the Conference Board, a private research firm, said jobs were "hard to get," still higher than any time during the 2001 recession or last year's sluggish recovery.
"Although layoffs seem to be diminishing, surveys indicate that households continue to be worried about the condition of labor markets," Federal Reserve Chairman Alan Greenspan warned in aspeech Thursday.
What's more, the economy still seems to be months away from creating the 150,000 or so jobs a month needed to help bring unemployment down. Without such growth, the unemployment rate likely will stay flat or rise.
"If job growth is just 50,000 a month, you can be sure that the unemployment rate is going to rise at some point in the coming months," said Ethan Harris, chief economist at Lehman Brothers.
Bush's job at stake
President Bush is crossing his fingers for a significant job-market rebound before next year's election, to help him avoid the fate of his father, who lost a re-election bid in 1992 because of sluggish job growth.
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Earlier this year, the president's Council of Economic Advisers promised his tax-cut plan would add about 300,000 jobs a month to the economy, which has not yet been achieved.
"The administration projected the economy would gain 306,000 new jobs each month once the tax package was passed," said Lawrence Mishel, president of the Economic Policy Institute, a liberal think tank. "So far, this has been a profound failure."
Treasury Secretary John Snow recently offered a more subdued prediction, that the economy would add about 200,000 jobs a month.
But that also seems unlikely, at least in the short term. The end of the year is usually a weak time for the labor market, and job-cut announcements jumped in October to the highest level in a year, according to outplacement firm Challenger, Gray & Christmas.
"With factors like technology, outsourcing and consolidation working against job creation, any job market rebound we see in the near future will be relatively small," the firm's CEO, John Challenger, said.