Updated from March 31

Stock and bond traders' fixation with the labor market reaches crescendo Friday when the government releases its March employment report at 8:30 a.m. EST.

While the number is always huge for markets, this month's reading carries on its shoulders the weight of several different worlds, including the political, where President Bush is counting on a jobs recovery to lift him to victory in November.

"If we don't get jobs this month, Bush will hire some new people for the Bureau of Labor Statistics," said Russell Sheldon, managing director of economic research at BMO Nesbitt Burns. "He needs them now to take this issue off the calendar. It's too reminiscent of this father's situation, where in fact things were getting better and we didn't know it at the time."

Anecdotal evidence built over the week in favor of what is now economists' third-straight bullish forecast on a monthly employment report. But with the prognosticators' haplessness in January and February fresh in their minds, investors withheld their euphoria.

In perhaps the most persuasive evidence to date that economists aren't completely out to sea, the employment index of the Institute for Supply Management's factory gauge shot up to 57 Thursday, its highest level since December 1987. The number came 90 minutes after the Labor Department report a small decline in weekly applications for jobless benefits.

The market's reaction was muted, with the Dow Jones Industrial Average adding just 16 points to close at 10,373, as twice-burned investors recalled their recent wounds and shied away from fresh trades.

How bad has it been in 2004? Last month, economists muffed the February employment report by a factor of six, predicting nonfarm payroll growth of 130,000 ahead of a print that showed only plus 21,000. Within three sessions, the Dow had shed 460 points.

A month earlier, with estimates running around 165,000, the Labor Department announced Feb. 6 that payrolls grew by 112,000. The miss came just before the Dow topped out for the year at 10,731, formally ending a year-old bull market and setting a top from which stocks have been falling ever since.

In both cases, pain was magnified by a whisper number that was tens of thousands of jobs higher -- gross mistakes attributable as much to human optimism as to the Street's occasionally blind faith in the sitting administration.

So it should come as no surprise that Wall Street's economic gurus are again predicting a sunny March employment report this Friday. The consensus estimate is for payroll growth of 123,000 jobs during the month, enough to hold the unemployment rate at 5.6%. Whisper numbers are twice that.

As in the past, the mood on Wall Street has brightened in the run-up to the Labor Department release, and many obviously believe the pundits are right this time. The Dow rallied more than 100 points both last Thursday and again Monday as faith in the grim science grew.

Other evidence has accrued to the bulls' case over the last few days, including a survey by Monster Worldwide ( MSTR) showing online recruitment steadily rose during the first quarter.

One of the biggest bulls is Wachovia Securities senior economist Mark Vitner, who is forecasting a net gain of 225,000 jobs in March. Even better, Vitner expects job growth to accelerate as the year goes on.

"The monthly figures should be above 200,000 for the foreseeable future," said Vitner, who called February's weak numbers an "aberration."

Vitner points to a number of trends as justification for his rosy outlook, such as the surge in corporate profits, a recent rise in help-wanted advertisements and a Manpower ( MAN) survey that found employers say they will do more hiring in the second quarter.

But talking about hiring doesn't mean you're doing it.

"Corporate managements are still gun-shy about hiring," says Tim Ghriskey, president of Solaris Asset Management, a Connecticut hedge fund. "This isn't a recovery that is on a steep trajectory. This is a slow and steady recovery."

That's probably best for the economy, providing a recovery tame enough to keep the Federal Reserve from raising interest rates before the end of the year. Barring some unforeseen surge in inflation or several months of phenomenal job growth, the Fed historically has been reluctant to tighten during a presidential election.

Of course, if the March jobs numbers really are as good as Vitner and others are predicting, the news could easily end the bull run in a much larger market. There's a feeling among traders that the recent spike in the price of the 10-year Treasury note and the accompanying slide in the yield to 3.88% are bonds' last gasp.

"Interest rates will hold steady, but the 10-year yield will move up again, regardless of what the Fed does," says Ghriskey.

As for stocks, slow and steady isn't what Wall Street wants, so anything short of a blowout number probably won't spark a huge rally. If that kind of number surfaces, however, look out. Surging new jobs have both economic and political benefits.

If there's any doubt Wall Street is rooting for the incumbent president's election, take a look at the where Street's biggest players are sending their donation checks. At last count, Wall Street firms have contributed $5.5 million to Bush's re-election campaign, compared with $1.2 million to John Kerry's campaign, according to the Center for Responsive Politics, a nonpartisan organization. In fact, a recent analysis by the center found that many of Kerry's biggest donors on Wall Street actually have given far more generously to Bush's re-election effort.

Citigroup ( C), which has contributed $79,400 to the senator's cause, has given $187,500 to Team Bush. Goldman Sachs ( GS) has raised $64,750 for Kerry, but donated more than four times that amount to the president's re-election war chest. Goldman Chairman and Chief Executive Henry Paulson is one of Bush's "Pioneers," wealthy individuals who have given large sums to the president's re-election effort.

Meanwhile, Morgan Stanley ( MWD), which has given $177, 075 to Bush, has given just a quarter of that sum to Kerry.

In an election year, everything has a tendency to be seen through a political prism. To some degree, it's no different with many of Wall Street's rosy job predictions.

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