(Author's note: Richard Posluszny contributed to this article).

As investors prepare to take a break for the holidays, they may have to digest another set of concerning items about the job market. Challenger Gray & Christmas will weigh in with its monthly layoffs report on Wednesday, followed up by the monthly read on unemployment rates a day later.

There's little cause for hope on either front.

To be sure, last month's big jump in the unemployment rate to 5.5% was partially attributed to quirks in monthly data. As a result, it is very possible that the indicator may tick back down a bit. In fact, consensus estimates imply a slight improvement to 5.4%. Yet that would not infer that the labor picture is improving. The less-volatile three-month moving average should show another increase.

If we are to avoid a more serious economic slowdown, the consumer will need to hang in there. Any further pullbacks in consumer spending could trigger a vicious cycle whereby slackening demand fuels further layoffs.

That is why it is imperative that the pace of layoffs begins to slow. If companies keep shedding employees and if unemployment moves up the 7% to 8% range, as has been in the case in past downturns, then it will be virtually impossible to avoid a recession. If there is a sliver lining to this possible scenario, it is that inflation pressures would recede as demand -- and bottlenecks -- slacken.

To get a pulse of underlying labor trends, we had a chance to check in with John Challenger, head of CGC. His firm has been tracking layoffs for more than 40 years, and it has a clear sense of how the current weak employment environment compares with past slowdowns.

In his initial remarks to us, Challenger notes that the labor market seemed to have a delayed response to the credit crisis. But that has changed in the last few months: "It is like the credit crisis has washed ashore," he says.

It's not just the housing and banking sectors that are taking it on the chin. Challenger notes that automakers had been averaging 4,700 in monthly layoffs but that that number spiked to 30,000 in May. He wonders if more job cuts lie ahead in Detroit.

Right now, automakers have to shift their sights to smaller cars, and that takes time: "They are going through a big paradigm shift. They're not there yet," Challenger says.

If oil prices rise higher, then further layoffs in Detroit could come in the second half of this year.

As the accompanying tables and chart show, the unemployment rate and layoff tallies have moved in step. For the jobless rate, creating new jobs is the other half of the equation, and that doesn't seem to be happening right now.

Unemployment Rates

Click here for larger image.

Will the Past Be Prologue?

Challenger concedes that it's hard to get a read on this slowdown in comparison with past periods of rising layoffs. He notes that this period has not been nearly as bad as the 2001 timeframe, presuming that companies entered this slowdown in much leaner fashion.

However, the current stresses that consumers are experiencing are fairly unprecedented.

Although layoffs tend to slow down in summer, Challenger says this week's layoffs report bears close scrutiny. You can be sure that if the CGC report notes lots of layoffs on Wednesday, then economists may fear as weakening in the employment rate on Thursday. Stay tuned!

David Sterman has been an equity analyst and financial journalist for 15 years, most recently serving as Director of Research at Jesup & Lamont Securities.