By Martin Wolk
msnbc.com
updated 3/4/2004 2:16:57 PM ET 2004-03-04T19:16:57

Billy Crystal got strong reviews for his return engagement as host of this week’s Oscar show, but his quip about a “tanking” economy struck a nerve with at least one brokerage economist.

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In one of the evening’s more memorable gags, Crystal described how things had changed since he first hosted the awards presentation in the early 1990s.

"You know how different it was?” Crystal said. “Bush was president, the economy was tanking and we'd just finished a war with Iraq."

Economist Brian Wesbury took Crystal to task in a humorless Wall Street Journal commentary, saying the remark was evidence that “Hollywood’s perception of the economy is not based on reality.”

Forget for a moment whether a line written for laughs actually reflects the film industry’s conventional wisdom. The line was funny — and the economy remains a campaign issue —precisely because the outlook remains shaky nearly two and a half years after the end of the 2001 recession. Despite second-half growth last year that was the strongest in 20 years, many Americans will not be convinced the expansion is genuine until they see an improving employment picture.

So Friday’s upcoming employment report is again a white-knuckle moment for financial markets and political leaders, as analysts speculate about a possibly strong figure but brace for potential disappointment.

On average, according to Thomson Financial, forecasters expect the unemployment rate to remain unchanged at 5.6 percent for February as the economy shows an increase of 128,000 payroll jobs. That would be the best result in more than three years but still below the level typically needed to keep up with growth in the labor force.

“There is evidence that firing is abating. As yet there is no evidence that hiring has picked up to any significant degree,” said Mark Zandi, chief economist of Economy.com, a forecasting firm. Zandi and other forecasters are skeptical the economy is on the verge of a sustained rebound in hiring, partly because employment signals have turned mixed in recent weeks.

Manufacturers consistently have been saying in recent surveys that they intend to increase hiring, raising hopes that the hard-hit sector will begin adding jobs again after 40 straight months of losses.

But consumer confidence has been slipping, partly because nearly one-third of those polled still say it is hard to find a job, a figure little changed from six months ago. And the latest monthly survey from the Conference Board showed growing consumer pessimism about the future outlook for the labor market.

"Some consumers are getting nervous about how good the labor market is going to get — and how soon,” said Ken Goldstein, an economist for the Conference Board, a business research organization.

If the Labor Department comes out with a strong report Friday, showing at least 150,000 to 200,000 net new jobs, “that might do an awful lot to quiet down that nervousness,” Goldstein said. But anything less will likely lead to continued angst, he said.

Concern about a lack of job growth is intensified in the echo chamber of a presidential election campaign that has just turned national as Sen. John Kerry has become the presumptive Democratic nominee. But Kerry is tapping into real political anger over an economic rebound that has created strong profits, a rising stock market, but few new jobs.

And the labor market weakness increasingly is affecting well-educated, white-collar workers —groups than have been able to bounce back quickly from layoffs in the past.

A  study released Thursday by two labor-oriented groups show that long-term unemployment of six months or more has risen 300 percent among workers with college degrees over the past three years, compared with 156 percent for workers with no college education. Long-term unemployment also has risen by more than 300 percent for information technology workers and among management, business and financial professionals.

Altogether 22 percent of the nation’s unemployed had been out of work for six months or more by the end of last year, up from 11.4 percent at the end of 2000, according to the Bureau of Labor Statistics. The study was done by the National Employment Law Project and the Employment Policy Institute.

Bond traders are especially skittish about this month’s employment report even though Federal Reserve Chairman Alan Greenspan and other central bankers have emphasized they intend to be extremely patient before raising interest rates from their current low levels. On Tuesday, traders seized on Greenspan’s remark that rates will have to rise “at some point,” even though he also stressed that the central bank has had good reasons to keep rates low for now.

“At this point everybody is really fearing that the (employment) number is going to print strong, showing growth in the labor market, which will speed up the track for Fed tightening,” said Mary Ann Hurley, a bond trader with D.A. Davidson & Co. But she noted that in past recoveries that Fed has not started tightening until the economy shows nine or 10 months of strong growth — at least 200,000 jobs a month.

Few analysts are predicting that kind of growth anytime soon.

Employment industry executive John Challenger said he thinks strong and steady job growth of that magnitude is unlikely in the current business environment, where companies have improved their ability to hone productivity through automation and outsourcing.

“All that has led to a period of low job growth, and it doesn’t matter what you do — that’s the way it is,” Challenger said. “I think this is a period of time where real job creation at the scale we saw in the '90s is impossible.”

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