Finally, an end to job losses

NEW YORK (CNNMoney.com) -- The long nightmare of job losses appears to be just about over.

When the Labor Department reports its monthly employment readings for March on Friday, economists are forecasting a gain of 184,000 jobs.

If that happens, it would be only the second month with a positive reading since December of 2007, and the biggest jump in employment since March of that year, a good nine months before the official start of the recession.

But even if the economists are right in their forecast, they caution not to get too excited about a report of a big jump in jobs. There are a number of short-term factors likely to distort the reading.

Storms in the middle of February caused a number of people to be out of work during the week that the Labor Department does its monthly survey of employers, so their return to work would be counted as a gain in the March reading. Some estimates say more than 100,000 of the gain could be weather-related.

Even more significantly the Census Bureau has started to hire the more than 1 million temporary workers it will need this year to complete the once-in-a-decade headcount of the U.S. population. That also could add more than 100,000 jobs to payroll in March.

Modest gains ahead. Even if the March reading is built on such ephemeral gains, many economists say they're seeing signs that the labor market is at a more significant turning point, and that employers are about to start adding jobs.

But most believe that while the labor market may have turned a corner, it's likely to see only modest improvements the rest of the year.

"This is the beginning of things getting better, but it's just getting better slowly," said Barry Ritholtz, CEO and director of equity research at Fusion IQ.

"We're not looking for 300,000-500,000 monthly job gains we saw in the 90s. It's going to be more in the 50,000 to 200,000 range the rest of the year."

The number of workers on payrolls that gets so much attention in the Labor Department report comes from a survey of employers. But the report also lists the responses of a separate survey of households that it uses to estimate the unemployment rate, and that survey has already shown a big jump in the number of Americans saying they have jobs -- 541,000 in January and another 308,000 in February.

That survey is typically more volatile and considered less reliable than the employer survey by labor economists. But Ritholtz said history shows a turnaround in the household survey job count can signal a change to come in the more widely-followed payroll number.

"We sometimes get an early read on improvement in the labor market because the household survey does a better job picking the start-ups and the small firms," he said.

Beyond the government numbers. One hopeful piece of real data is an improvement in the amount of income tax withheld by employers in March. That reading is the basis of an estimate of a 280,000 gain in employment in the month by investment firm TrimTabs, and a 300,000 increase in jobs by the research service DailyJobsUpdate.com.

The tax withholding information suggests that the labor market is actually stronger than the much publicized payroll reading is likely to show Friday, said Charles Biderman, CEO of TrimTabs.

But even Biderman doesn't believe that employers are ready to go on the kind of hiring binge necessary to make a significant dent in the unemployment rate, which stood at 9.7% in February.

He thinks unemployment will still be near 9% at the end of the year, even if the payrolls start rising by about 200,000 a month the way he expects. That pace of job growth barely covers the growth in population and the number of discouraged workers returning to work.

"We think that things are getting modestly better," he said. "I just don't see any engine of growth that will take us above a modestly growing economy."

Matt Trivisonno, the founder of DailyJobsUpdate.com, said the improvement in the withholding tax reading is significant because historically it only changes direction when the labor market itself is undergoing a fundamental shift. But he said it can still take months for the overall number of workers on payrolls to post steady, sustained improvement.

"I would say it's definitely improving, but there are headwinds," he said. "During the last recovery we had a monster real estate boom going on. We don't have that kind of jobs producer this time around."

Another estimate by payroll services firm ADP on Wednesday estimated there was a 23,000 drop in private sector employment in March, a disappointment for economists who had forecast an increase of 40,000 jobs.

Joel Prakken, chairman of Macroeconomic Advisors, the firm that prepares the ADP reading, says despite the disappointing reading, he also believes the labor market is reaching a turning point. He's hopeful that once Americans believe the labor market has improved, it will help to unleash a lot of pent-up spending, which in turn could spur growth and job gains.

"What really has changed the amount of uncertainty that people are attaching to the wage and salaries," he said. "The very fact that employment has stabilized is one reason consumer spending has revived and performed better than many forecasters were fearing."