NEW YORK (CNN/Money) -
In the movie Groundhog Day, Bill Murray played Phil Connors, a TV weatherman stuck in a time loop, repeating the same day over and over again. Many economists probably feel a little bit like grizzled old Phil right now when they hunker down to forecast U.S. government stats on the labor market.
Since at least November, there have been signs of a long-hoped-for jump in jobs, leading economists to make fairly rosy forecasts. And since November, those forecasts have been wrong, and job growth has disappointed.
Will March's jobs data, due on Friday, finally be the moment when the loop is broken? Maybe not -- though things could look a sight better than in February, when just 21,000 new jobs were added to a labor market of more than 130 million.
Economists, on average, think unemployment held steady in March at 5.6 percent and that non-farm payrolls grew by about 123,000 jobs, according to Briefing.com.
While such job growth would be the best since December 2000, it would barely keep up with the average monthly growth in the labor force, and would certainly be weaker than the health of the overall economy would seem to warrant. Despite nine (going on ten) straight quarters of economic growth, non-farm payrolls are still 2.3 million jobs below their peak in March 2001.
While some economists think the Labor Department could be undercounting payroll growth, few believe the job market has been as robust as it should be in a typical recovery. A corporate obsession with cost-cutting often gets the blame, with companies using technology to squeeze more work out of fewer workers and moving some jobs overseas.
But just like Phil Connors, economists have slowly adjusted their behavior to account for the new reality. Phil shed his self-centeredness and bitterness; some economists have been ditching or re-tooling their forecasting models.
"We have somewhat limited confidence in our forecast because the traditional models we have used to forecast hiring have all broken down," Lehman Brothers economists -- who expect 95,000 new jobs in March -- told clients in a research note last week.
The economist who's been most right in recent months is Richard Yamarone at Argus Research, who's taken a somewhat unique approach to forecasting, listening to hundreds of corporate conference calls and CEO speeches, none of which gave him warm, fuzzy feelings about the immediate future of the labor market.
There weren't many conference calls in March, and Yamarone says he's hearing corporate decision-makers talking about creating jobs -- but not right away.
"All of these corporate chieftains are saying new hiring is in the cards, around the corner, down the road -- but that doesn't mean March," Yamarone said Thursday.
Yamarone expects just 40,000 new jobs in March, and some other forecasters have moved their numbers down into his neighborhood, including the Bank of Tokyo-Mitsubishi, MCM MoneyWatch, International Insider and Banc One Investment Advisors.
"I haven't seen increases in the workweek strong enough to augur that all of a sudden employment is going to surge," said Banc One Investment Advisors chief economist Anthony Chan. "If I had seen that in the past couple of months, I would be more optimistic."
But optimism is high among many other economists, and they make a convincing case. Several traditional forward-looking labor indicators have been fairly screaming for decent job growth in March, including:
- a fairly steady downward trend in new weekly claims for unemployment benefits
- a gain in the Institute for Supply Management's manufacturing employment index in March
- good weather in March
- the end of the California grocery workers' strike, which could add more than 20,000 jobs to payrolls
- the strongest quarterly Manpower International survey of hiring intentions in three years
- a slight improvement in the Conference Board's Help Wanted index for March
- a strong first showing for the Monster.com online help-wanted ad index, released on Thursday
- a recent survey of 216 CFOs by Financial Executives International showing expected payroll gains of 5 percent in 2004
- continuing strength in corporate profits
- several months of steady gains in temporary help payrolls, usually a good leading indicator
It is awfully tough to ignore such a mountain of evidence, and many economists do not -- even though similar indicators have steered them wrong in recent months.
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"Being either stubborn or persistent, depending on whether this month's forecast turns out to be right, I believe that the March employment report should, finally, show the long-awaited jobs pop," said Russell Sheldon, senior economist at BMO Nesbitt Burns, who has long been optimistic about payroll growth.
Unfortunately, some key negative indicators are still pointing to a weak job market -- just as they have been in recent months -- while other gauges have turned slightly lower:
- the Conference Board's "jobs hard to get" index, part of its consumer confidence measure, rose in March
- the number of unemployed drawing benefits has held steady, despite the fact that many have exhausted their benefits
- in contrast to the ISM employment index, factory payroll gauges from the Philadelphia Fed, Chicago purchasing managers and New York Fed all turned lower in March
- small business hiring plans slipped in February, the latest data available, according to the National Federation of Independent Business
The Conference Board gauge was perhaps the most striking of those numbers, indicating consumers are still not swayed by the optimism of many economists.
Maybe their minds have been poisoned by excessive focus on offshore outsourcing by politicians and the media, as some economists suggest. But after seeing disappointing numbers for years, despite robust growth in the broader economy, perhaps consumers are right to be cautious.
"At every stage in the past three years, employment has disappointed relative to overall activity," said Ethan Harris, chief economist at Lehman Brothers. "It's a chronic issue, and there's been a tendency for economists to hope this will finally be the month when improvement occurs. But I have no reason to believe it will."