Markets Break for Jobs

November's payrolls number could be the swing vote for the markets' and the Fed's outlook on rate cuts and the economy.

Most economists expect the Labor Department's report Friday of new jobs added to print 105,000, up slightly from earlier estimates this week of 100,000. Analysts and economists expect the unemployment rate to climb to 4.6% from 4.4%.

If the report comes in as predicted or stronger, the Fed's hawkish talk and sanguine economic outlook will seem prescient. The conclusion would be that the soft landing for the economy is in play, and that it may not be enough to dampen inflation, making rate cuts unlikely.

A strong labor market means people can count on their income stream and keep spending through the holidays. The dollar would rebound and stocks probably rally, while Treasury bonds would likely sell off, pushing yields to the mid- to upper end of their recent range.

If the labor market shows considerable softening, on the other hand, the Fed may be forced to acknowledge a slightly harder landing for the economy than Chairman Ben Bernanke and other officials have forecast.

The bond market might rally, sending the 10-year note yield back to new lows for the year, while stocks and the dollar likely would suffer, as it would signal the economy is feebler than investors had hoped.