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The WSJ provides a nice preview:

All eyes are on the Labor Department’s employment data for August, set to be released on Friday — one that might look good by comparison but probably won’t show any substantial improvement in labor-market conditions last month.

It’s a familiar theme of late. Last month, the government’s employment report showed the economy shed 247,000 jobs in July and the unemployment rate stood at 9.4% — news that compared to prior months was positively cheery. For one, the jobless rate declined for the first time since February 2008, although as we noted last month, it resulted from people dropping out the labor force. Meanwhile, the 247,000 job losses in the month marked the smallest decline since August 2008.

So what can we expect from the coming report? The consensus forecast from a Dow Jones Newswires survey sees the unemployment rate rising back to 9.5% amid 233,000 job losses. Essentially, economists expect the labor market didn’t get significantly better — or worse — last month.

The middling forecast partly results from conflicting signals in other employment reports this week:

  • The Institute for Supply Management released reports showing expansion returned to the manufacturing sector last month while the rate of contraction slowing in services industries, two glimmers of good news — but the employment components of both reports suggested job cuts continued in August.
  • On Tuesday, payroll giant Automatic Data Processing estimated that 298,000 private-sector jobs were lost in August, though it could be overstating the weakness partly because it doesn’t include government jobs that are included in the Labor Department statistics, and also because the index has overshot the official number for six of the last eight months.
  • Finally, today the Labor Department issued the latest data on weekly jobless claims. The number improved slightly, but the level of initial claims for unemployment benefits has remained stubbornly high. As we noted last month, the peak in jobless claims often presages the end of recession and improvement in the jobs market, but the drop from the peak is moving especially slow in the current downturn.

All of this indicates that Friday’s number is likely to be slightly better, but pain in the labor market isn’t past yet. “Employment conditions are improving at such an agonizingly slow pace that most Americans will not be able to detect any genuine improvement,” said Bernard Baumohl of the Economic Outlook Group. “We expect to see only microscopic improvements. That may well typify what the 2009-2010 economic recovery will be about.”

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