Those out there looking for a surprise out of the May

employment report might get their wish -- just not a surprise of the pleasant variety.

The consensus forecast among economists is for

nonfarm payrolls

to decline by 17,000, but a number of economists say there's good reason to think this figure will be much worse, with losses ranging anywhere from 60,000 to 100,000. Payrolls declined in both March and April, with a whopping 223,000 loss of jobs in April. The

unemployment rate

is expected to rise to 4.6% from 4.5%.

Equities have stepped unsteadily in the last week, and another round of lousy job numbers could cause some more pain in that market. The bond market is already rallying in front of tomorrow's report, and could rally on a weak number tomorrow.

The labor market has grown even bleaker since April's terrible

report, and economists believe the weakness could persist for several more months. There's growing concern that declining job security will exert a greater force on consumer spending behavior through the summer and fall.

Expectations that May's report isn't going to come out well are being fostered by the steady rise in

initial jobless claims and an accompanying rise in people remaining on the unemployment rolls. It suggests jobs are becoming harder to find. Weekly claims are averaging more than 400,000 -- highest in nearly nine years.

"It doesn't speak well to a recovery before the fourth quarter," says Vince Bobeski, senior economist at

Dain Rauscher

, who is looking for a 60,000 decline in payrolls. "A lot of what the consumer is going to do over the next couple of quarters depends on how confident he feels about the labor market."

That's the great mystery in the economy now -- whether the labor market will sag to a point where it causes consumer spending to fall more dramatically, pushing the economy into a recession, or whether the Fed's massive dose of interest-rate cuts will result in businesses weathering the storm and retaining workers, so that such an occurrence is avoided.

Economists are mixed in this regard. Some believe that there's a point where the lack of job security will ultimately cause consumers to retrench dramatically. They'll pull back their spending because they're worried about losing a job, which cuts back company profits, and so on and so forth until the economy hits a recession.

For months, pundits have trumpeted the notion that the labor market is a "lagging indicator," but several economists say that at some point, it becomes a leading indicator of where spending is going. Lousy job markets aren't good for spending in the long run.

Some indicators are worrisome in that regard. The most recent

Consumer Confidence Index, which showed an upturn in confidence in May, isn't quite as uplifting as one would think. The upturn was based largely on expectations for a rebound -- rather than people's assessment of current conditions. (In a sense, the consumer is behaving like the stock market, hoping for a far-off economic recovery.)

Within that survey, more people have become less confident about their ability to find a job.

"The two confidence measures are showing improvement based on hope, not facts," says Brian Jones, economist at

Salomon Smith Barney

, who expects payrolls to decline by 125,000. "At some point, things have to improve to buoy expectations."

But others believe the consumer has quite a bit of resilience at this point. With 95% of the labor force still employed, and with hourly wages rising at a 4.3% rate on a year-over-year basis, some say there simply isn't enough of a decline in the labor market to warrant fears about an imminent recession.

Average hourly earnings

are expected to rise 0.3% in May, which would put the year-over-year rate at 4.4%, strongest in three years.

"Right now only (14.7%) of the people are saying jobs are hard to get," says Peter Kretzmer, economist at

Bank of America

, who expects payrolls to drop by 100,000. "If you look back at recessions we've had, typically that number was twice or three times as high. There was a time during the recession of 1982, when 60% of the people were saying that."

Kretzmer believes that ultimately, the job market will stabilize, and he doesn't expect the unemployment rate to breach the 5% level. He believes the economy will endure some weakness in the intervening months, but says the resilience in the consumer, fostered by a 10-year economic expansion, won't run off the rails into a ditch this summer.

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