05/30/2010 05:12 am ET Updated May 25, 2011

Jobs Story: From Gory To Glory

Take your pick -- Marvelous Monday or murderous Monday.

That's one of the torrid topics on Wall Street right now as market pros nervously await Friday's critical March jobs report. The market is closed that day because of Good Friday, so any impact on stock prices will have to await the following Monday's trading.

The general expectation is that the economy will create about 200,000 jobs in March, following the loss of 36,000 in February. Buoying the latest numbers is the government's temporary hiring of workers -- estimated at somewhere between one million and 1.2 million--to conduct the 2010 census.

"Monday could be a gory day or a day of glory," says Selwyn Ortz, a trader at Hong Kong-based HK Investments Ltd. He figures we'll probably see a meaningful reaction in the form of a triple-digit Dow performance; in other words, up triple digits if the consensus is right or down triple digits if there's a major disappointment. Given the exuberant expectations, he guesses that if Friday only shows a gain of say 100,000 jobs, the Dow is apt to drop between 30 and 50 points.

His outlook calls for a six-figure jobs creation number of something around the anticipated 200,000, which he sees adding further fuel to the growing belief that the U.S. economy is indeed out of the woods. In fact, he's already begun buying some U.S. stocks -- strictly for trading purposes -- which he expects will benefit from the positive jobs numbers, namely financials and retail.

Noting that one of his Wall Street contacts expects March to show a jobs loss, Ortz believes if that were to happen, "we could see a mini-bloodbath, with the Dow falling Friday more than 200 points."

Madeline Schnapp, director of economics at West Coast liquidity tracker TrimTabs Research, which is partly owned by Goldman Sachs, tells me she expects "jobs growth in March will surprise on the upside," with the month producing a hiring of between 220,000 and 300,000 workers. Her single best number is around 245,000. About 200,000 of the new jobs, she figures, can be attributable to the census. In turn, she expects the unemployment rate, now at 9.7%, to drop in March to about 9.5%.

Schnapp, who expects her projected March jump in employment to generate a triple-digit Dow gain, also points to a major plus -- an economy on the move, with income tax withholdings accelerating rapidly. That means, she says, rising income and increasing jobs. Adding to the economic vigor, she observes, 90% of the working population is spending. Indicative of this, consumer spending has risen. Five months running.

Looking beyond March, Schnapp sees as many as 600,000-700,000 jobs created in April, 300,000-400,000 in May, and 100,000-200,000 in June. By June, she figures, the unemployment rate should drop between 9.2% and 9.3%.

After that, as the census jobs unwind, Schnapp looks for the real unemployment rate by summer to move back up to between 9.4% and 9.5%, better than today's numbers, but not exceedingly robust.

Sounds good, but she also hastens to toss in a word of warning. That is, if the U.S. can not sell all the Treasuries it needs to fund its current operations, "then all bets are off and you can change the spelling of the U.S. to G-R-E-E-C-E."

She raised the issue of Treasury sales on a couple of counts. One was the poor response to last Thursday's Treasury auction of five and seven -- year Treasury securities, which let to a spurt in interest rates. The other: brisk foreign sales of U.S. Treasuries. For example, in December and January, China and Russia reduced their Treasury holdings by a combined $67.2 billion. "They could be tired of propping up the U.S. economy's spendthrift ways," Schnapp says. In contrast, some market pros see these sales as simply another sign of waning demand for U.S. Treasuries. At present, foreigners hold about 50% of U.S. Treasury debt.

Peter Morici, Professor of Economics at the Robert H. Smith School of Business at the University of Maryland, says the market is looking for a breakthrough jobs report for March and it will get it. His forecast: the creation of 150,000 jobs. He notes, though, that the economy needs to create about 140,000 jobs a month to keep pace with labor force growth, and is a long way from getting back the 8.4 million jobs it lost during the recession.

While a number of pros see a hefty stock market gain if March does indeed show 200,000 new jobs, San Francisco money manager Gary Wollin is not among them. "It won't have much of an effect because that expectation is already baked into the market," he says.

The bottom line: As far as the market goes, gobs of new jobs had better be created in March, or else find a good hiding place.

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