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Will the

Federal Reserve

lower its interest rate target at its policy meeting next Wednesday? Investors probably will have their answer, or at least a strong indication, following this morning's payroll report.

"This is one of the most pivotal payroll reports we have had in a year," said Ethan Harris, an economist at Lehman Brothers. "It could either calm nerves about the economy or add to worries."

If economists' forecasts are right, the report will contribute to a drumbeat of negative news that has fueled speculation that the Fed will ease next week.

After losing 43,000 jobs in September, the economy is expected to have flat payroll growth in October, according to economists' consensus. Meanwhile, the unemployment rate is predicted to tick up to 5.8% from 5.6%.

A weak unemployment number would come on top of a barrage of dismal economic data lately. "I think the Fed has been softened by absolutely ugly second-tier economic reports," Harris said.

The consumer confidence index, for instance, came in Tuesday at its worst level in nine years. Following that news, fed funds futures, a good proxy of monetary policy, increased odds of an interest rate cut. They are now forecasting a 95% chance of a 25-basis-point cut in rates at Wednesday's meeting.

In other reports, the latest weekly tally on jobless claims show that they rose to 410,000, higher than the 400,000 forecast. And the Chicago purchasing managers reported Thursday that their index fell to 45.9 in October from 48.1 in September. A reading below 50 suggests contraction in the manufacturing sector, which had been rebounding in recent months.

After its last monetary policy meeting, the Fed, which has already brought down interest rates to their lowest level in over 40 years, said it would be monitoring weakness in the economy.

Anecdotal evidence in October's news reports suggest layoffs have been plentiful.

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are among the latest companies to pare back their workforces.

"Businesses are shell-shocked from the blows they received in the recession," said Sung Won Sohn, an economist at Wells Fargo. "They refuse to hire people, build inventories, or buy capital equipment."

Average hours worked, a component of the employment report, are predicted to decline in October.

"Things are stalling out as companies under pressure to increase earnings performance in the short run are cutting costs," said Dave Greenlaw, an economist at Morgan Stanley Dean Witter.