NEW YORK (

TheStreet

) -- The focus of next week is in the hands of U.S. lawmakers as they struggle to break the impasse over the nation's budget deficit and debt ceiling.

With the Obama administration promising to work through the weekend to ensure that the U.S. will be able continue to pay its bills after the Aug. 2 deadline to raise the debt ceiling, an all-out default is likely to be avoided. Still, the fate of the country's triple-A credit rating still hangs in the balance.

Ratings agencies have warned that only the passage of a credible deficit-reduction plan -- one that includes at least $4 trillion in deficit cuts, according to Standard & Poor's -- will signal the country is serious about getting its finances in order.

"I think in everyone's eyes, the reality is that the U.S. probably garners a double-A rating because of the type of spending that we have. So the ratings agencies have to make these threats but they also understand the serious ramifications that a downgrade would have on this recovery," said Chris Hobart, president and founder of Hobart Financial Group, pointing to the numerous foreign countries and companies that exclusively hold the U.S.'s triple-A rated securities.

"I think that if the credit agencies were actually going to downgrade the U.S.'s rating, they would have done so already," he added.

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If a deal isn't reached by Aug. 2, however, the market could drop as much as 10%, said Michael Yoshikami, president and founder of YCMNET Advisors, although he added that lawmakers likely would reach an agreement the very next day.

Another possibility is that Washington will successfully raise the debt ceiling in time but fail to come to an agreement regarding a deficit reduction plan.

"A short-term deal would be like loosening your belt after Thanksgiving dinner," said Hobart of Hobart Financial. "It alleviates some of the pressure, but it's still an issue that you have to deal with."

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"If Washington manages to pass a debt ceiling and budget reduction plan, it'll smooth things over in the market in the short term," he said. "But these are real concerns that will continue to weigh on the market as we go further along."

With debt issues likely getting addressed early in the week, market watchers expect Wall Street's attention to shift to the July jobs report due out later in the week.

"I think the GDP numbers and the jobs reports are really the key issues now in terms of how the economic recovery is progressing," said Yoshikami of YCMNET Advisors. "Unfortunately, we just got a disappointing GDP number so I think by Wednesday or Thursday, the market is going to be anxious to see whether there's improvement in the labor market."

On Friday, the Department of Commerce said the U.S. economy grew at a slower-than-expected pace of 1.3% in the second-quarter, according to its advance estimate. That compares with first-quarter growth of 0.4%, which was revised down from an earlier reading of 1.9%. Economists had been anticipating second-quarter growth of 1.7%, according to Briefing.com.

Economic reports scheduled for early next week are likely to be overshadowed by U.S. debt deal developments. Monday brings a July reading on U.S. manufacturing activity from the Institute for Supply Management in addition to the Census Bureau's report on June construction spending. Tuesday offers data on June personal income and spending from the Department of Commerce.

July jobs data will start to trickle in on Wednesday morning with Automatic Data Processing's look at company job gains during the month. Economists are anticipating private-sector job growth of 95,000 in July, after gains of 157,000 in June.

Also on Wednesday, the market will get a look at June factory orders, which are expected to have fallen 1% after rising 0.8% in May. Activity in the services sector is expected to dip to a reading of 53.1 in July from June's level of 53.3 when the ISM releases its services index at 10 a.m. EDT.

Jobs data will remain in focus on Thursday with the Labor Department's weekly read on initial jobless claims. The market is forecasting a rise in claims, to 405,000, from 398,000 in the prior week.

Friday brings the Labor Department's closely watched monthly nonfarm payrolls report. Wall Street is anticipating July job gains of 78,000 after June's meager increase of 18,000 payrolls. Companies are expected to have added 100,000 jobs, compared with gains of 57,000 in June. The unemployment rate, meanwhile, is projected to dip to 9.1%, from 9.2%, previously.

Earnings season is over the hump, but another 107

S&P 500

components are slated to next week, including names like

Pfizer

(PFE) - Get Report

,

Clorox

(CLX) - Get Report

,

Mastercard

(MA) - Get Report

,

Priceline.com

(PCLN)

,

Kraft Foods

(KFT)

and

Procter & Gamble

(PG) - Get Report

.

Through Friday afternoon, 327

S&P 500

components had reported their results with 73% topping Wall Street expectations, a touch higher than the long-term average, according to

Thomson Reuters

.

-- Written by Melinda Peer in New York

.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.