This week's economic data seem to have Wall Street believing a recovery is imminent.

But November's employment report, though likely to show that fewer jobs were lost last month than in October, could make the hopeful think differently. The Labor Department is expected to say Friday that nonfarm payrolls fell by 189,000 in November, according to economists polled by

Reuters

, after a 415,000 drop in October, the biggest monthly loss since 1980. Economists expect the unemployment rate, which hit its highest level in five years in October, to rise to 5.6%.

"The markets have priced in a lot of recovery over the last few days," said Peter Kretzmer, an economist at Banc of America. "Tomorrow's report is likely to be a reminder that we're still in a recession."

On the heels of some better-than-expected economic data, the major indices have posted big gains this week. The

Dow Jones Industrial Average is up 2.6% over the past four days, holding above 10,000, although the measure eased in trading Thursday. The

Nasdaq is ahead 6.4% this week, and atop 2000 for the second straight day.

Among traders, a consensus is building that the markets may have gotten ahead of themselves. "This rally will be difficult to sustain, unless the data is all good from here on out," said Peter Blatchford, a trader at Miller Tabak.

Several companies set plans for workforce reductions in November, with

IBM

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and

Citigroup

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among them. According to outplacement firm Challenger Gray & Christmas, companies announced plans to cut 181,412 jobs in November, a decline of 25% from October's 242,192. Still, November marked the sixth month this year that planned job cuts exceeded 150,000.

"At this point in the recession, you would expect deterioration in the labor market," said Josh Feinman, an economist at Deutsche Asset Management. The unemployment rate is considered to be somewhat of a lagging indicator. In 1991, the jobless rate rose for a year after the recession ended, reaching a peak of 7.75% in the spring of 1992. This time around the unemployment rate is likely to hit 6% this winter, bottoming at around 6.5% in the spring, Feinman speculated.

Nevertheless, the decline in payrolls is thought to be coincident with the business cycle. "When the economy is contracting, you get a decline in payrolls," said Feinman. "That will be confirmed in tomorrow's report."

On a positive note, the Labor Department said that the number of U.S. workers claiming first-time unemployment benefits fell in the week ended Dec. 1 to 475,000, from 493,000 in the previous week. But experts weren't reading too much into the weekly data, since big swings tend to occur around the holidays. The four-week average of jobless claims, which helps account for weekly aberrations, rose to 460,750, from 455,000.

The

Federal Open Market Committee will meet Dec. 11 and decide whether to cut rates for the 11th time this year. If the jobs report comes in worse than expected, the chance of another reduction, which would take the

fed funds target rate below 2%, will increase.

Economists generally think the November report will correct the steep drop in the previous month. "There was a pronounced adjustment in the labor market in October after the terrorist attacks," said Mike Moran, chief economist at Daiwa Securities. "Because of it, there is going to be less of a change in November."