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at the bell

The U.S. reported impressive jobs creation numbers for April, but there's a long way to go to make up for the 8 million positions lost in the financial crisis.Mark Lennihan/The Associated Press

The risk-factor for Friday's U.S. jobs report is high.

The U.S. economy is forecast to have created 533,000 jobs during May, according to a survey of economists by Bloomberg, but much of that is expected to represent temporary hiring by government for the census. About 290,000 jobs were generated during April, according to the non-farms payroll data.

There is also every reason to expect that at least some speculators are leaning in the wrong direction with a high estimate for job creation during May of 750,000 and a low-ball forecast of 220,000, according to Bloomberg data.

What are the expectations? Investors will be focusing on private-sector hiring buried in the data. Although economists expect that will increase for the fifth consecutive month, it appears hiring slowed during May as evidenced by the failure of the initial jobless claims data to fall and indications that hiring by the manufacturing sector has slowed.

"We would not be surprised to see upwards of 400,000 new positions in this one category [census hiring]alone," said Meny Grauman, an economist with CIBC World Markets Inc., He expects private-sector hiring will reach 150,000 in May, having sharply lowered his estimate by 50,000 jobs this week.

CIBC World Markets expects the monthly employment gains will average 150,000 to 200,000 jobs during the second half of 2010 and into 2011. "It would be an historically slow recovery," Mr. Grauman said. "In past recoveries you would see double that monthly gain."

That rate of job creation would not make a big dent in the unemployment rate until well into 2011, Mr. Grauman said. "Although U.S. economic fundamentals look good, the recovery looks like it is ahead of plan. We expect the recovery in the U.S. will slow down in the second half of 2010 and into 2011."

CIBC World Markets expects the U.S. house construction industry, a big employer, will take a long time to recover and it thinks U.S companies will be able to meet increased demand by extending the hours worked by their current employees instead of hiring new ones.

The U.S. unemployment rate today is expected to decline to 9.8 per cent during May from 9.9 per cent in April, according to Bloomberg.

How will the market react? For those bullish about the stock market, it will all depend on U.S. jobs. That will be critical both for the housing recovery and the retail sector.

And the third quarter of 2010 could be pivotal. "The bulk of fiscal-led stimulus dollars will be spent then and the patient will be taken off life support," said Paul Taylor, chief investment officer for BMO Harris Private Banking. "Will this become a self sustaining recovery?"

The outlook is good, Mr. Taylor said. "We have [already]seen job growth, which is the catalyst for organic growth. ... As we get into the latter half of 2010 there will be meaningful job growth," he said. He expects the economy will create 250,000 to 300,000 jobs a month, which is what is needed to significantly reduce the unemployment rate. Over the next three years he expects a modest average annual growth rate in the U.S. of 2.5 per cent to 3 per cent with the growth slowed because of high debt levels.