NEW YORK (CNN/Money) -
After a long slump, the labor market seems poised to finally show real strength in 2004, but some economists doubt that rebound will show up in Friday's unemployment report.
Economists, on average, expect the Labor Department to say unemployment held steady at 5.9 percent last month and payrolls grew by 148,000 jobs outside the farm sector, according to Briefing.com.
While nearly 150,000 new jobs are clearly better than the job losses suffered in early 2003, that level of job growth barely keeps up with the growth of the labor market, meaning it won't lower the unemployment rate. And it's certainly a far cry from the rapid job growth seen in other post-recession periods.
"The labor market has not accelerated to the extent one might expect, judging from past cycles, and we probably won't see evidence of it again in the December numbers," said Alan Ruskin, research director at 4CAST Ltd., a market and economics research firm, which is forecasting just 100,000 new jobs in December.
Ruskin and some other economists believe snowstorms in the Eastern United States early last month may have slowed hiring in construction and other industries. Meanwhile, the call-up of 24,0000 reservists, the lingering effects of the California grocers' strike and seasonal quirks around the holidays could also sap some strength from December's reading.
But some forecasters are expecting a much stronger number, even factoring in such drags.
Henry Willmore, chief economist at Barclays Capital, expects that 170,000 new jobs were created, a forecast that would have been 195,000 if not for some of those one-time factors.
"There are plenty of signs that we're really on the cusp of much better job growth -- it may be a month or two away, but it should be happening any month now," Willmore said.
Reasons for hope
Though it usually takes a while for unemployment to fall once the economy's started growing again -- since employers are hesitant to start hiring until they believe the recovery is for real -- the United States has enjoyed eight straight quarters of growth, including the strongest performance in 20 years in the third quarter, without significant job creation.
In fact, since the declared end of the latest recession in November 2001, nearly 800,000 payroll jobs have been lost, according to the Labor Department. That would make this recovery period the most "jobless" since World War II.
But several indicators have been pointing up for the job market, including:
- A steady downward trend in the number of new weekly claims for state unemployment benefits
- A jump in the Institute for Supply Management's manufacturing employment index in December
- A gain in first-quarter hiring plans from the latest survey by staffing firm Manpower Inc. (MAN: Research, Estimates)
- An increase in help-wanted advertising, as measured by the Conference Board, another private research firm
"The labor market indicators are sending a strong enough signal to suggest that a strong payroll report is nigh, and will therefore be seen soon enough," said Tony Crescenzi, bond market strategist at Miller Tabak & Co. "If a blowout report isn't seen this Friday, the odds will be even higher on Feb. 6," the date of the department's January jobs report.
Reasons to worry
But there have been other signs the labor market isn't fully healed
- The number of people drawing unemployment benefits for more than a week hit its highest in four months late last year
- The percentage of people saying jobs are "hard to get" has stayed near the highest level in a decade in consumer surveys
- Small business hiring plans shrank in November, the latest data available, according to the National Federation of Independent Business
Some economists worry that structural changes in the job market, including technological advances and a growing appetite for cheap offshore labor, will keep hiring muted in 2004.
"These ... factors are going to keep hiring from taking off in 2004," said John Challenger, CEO of Challenger, Gray & Christmas, which issues monthly tallies of job-cut announcements. "Job seekers certainly should not expect to see a repeat of the tremendous job expansion of the mid-to-late 1990s."
"The fact is, we may not see a true job market boom until the next economic cycle around 2008," he added.
But other economists disagree, saying productivity gains and labor globalization can co-exist with growth in domestic hiring, since they can boost corporate profits, allowing companies to expand and develop new technologies.
"Although a heightened degree of overseas job outsourcing is probably taking place, the phenomenon is likely exaggerated by newspaper headlines," Banc of America chief economist Mickey Levy said this week.
"In any event, the net impact on aggregate employment is positive in the long run," he said, adding that fears of workers being permanently replaced by technology has historically been "unwarranted."
Still, Levy said he expected payroll growth of just 140,000 jobs a month, barely enough to keep up with the growth of the labor force -- meaning unemployment shouldn't fall much in 2004.