Jobs Report Fuels Recession Talk

The credit crunch is coming home to roost in 2008, and Friday's employment report could solidify recession fears in the markets.

"Employment growth is expected to moderate significantly, associated with flatter economic activity," writes Bank of America chief economist Mickey Levy. His warning comes as Wall Street braces for what many fear will be massive rounds of layoffs of traders, salespeople and others tied to the mortgage-backed-securities businesses in investment firms that have logged severe losses in 2007.

Rumors are swirling through the new year about job losses at Merrill Lynch(MER Quote - Cramer on MER - Stock Picks), Bear Stearns(BSC Quote - Cramer on BSC - Stock Picks) and Citigroup(C Quote - Cramer on C - Stock Picks), in particular, as these firms marked some of the biggest declines and losses.

Cramer: Make Jobs Data Work for You

The nonfarm payrolls report for December comes on the heels of a surprisingly benign slew of economic data released through most of 2007. While economists waited for signs of an economic decline, the seizing up of liquidity in August seemed to have no severe impact on the real economy. The markets barely noticed data points like the Institute for Supply Manufacturing surveys or factory orders, as traders trained their eyes on the more immediate machinations of a credit crunch.

Canceled private-equity deals, writedowns on mortgage-backed securities and mortgages by Wall Street's banks and lenders like Countrywide(CFC Quote - Cramer on CFC - Stock Picks), the dried-up short-term commercial paper market, and how much higher the London interbank offered rate was running compared with the fed funds target rate reigned as key market drivers.