After a brief but torrid love affair in the 1990s, it seems as if Wall Street and Main Street have reverted to their historic, somewhat adversarial relationship. The re-emerging dichotomy will be back on display Friday, when the February employment report is released.

To hear market professionals tell it, these are prosperous days: Financial markets are strong worldwide, inflation is low, monetary and fiscal policies are highly accommodative, corporate profits are up, and securities industry hiring and bonuses are back. Save for maybe a little too much regulatory zest, there's very little Wall Street is fretting about these days.

Conversely, consumer confidence is down from its recent peak, personal bankruptcies and household debt are at or near record levels, and many Americans remain anxious about the labor market and geopolitical events. Outsourcing and technology-driven productivity gains may be great for corporate America's bottom line, but, near term, they're not necessarily so good for American workers.

"There is a disconnect going on," said Paul Kasriel, chief U.S. economist at Northern Trust. "In the 1990s, the stock market was going up and wages were higher. Now, the market is going up but hiring is barely visible and wages are not going up very rapidly." (Through January's employment report, wage growth was up only 1.6% in the past year.)

For February, the unemployment rate is expected to remain at 5.6%. More crucially, nonfarm payrolls are projected to rise by 125,000, which would be the sixth-consecutive month of growth and the strongest month in more than three years. However, it also would be shy of the level economists say is necessary to put the unemployed back on the job and keep pace with the growing workforce -- not to mention the Bush administration's prior forecast of average monthly gains of over 300,000 in 2004. (Side note: It's getting close to "put up or shut up" time for overly optimistic politicians and economists who've been promising for months now that robust jobs growth is imminent.)

The average American likely would cheer a stronger-than-expected employment report. Wall Street, however, might have a less enthusiastic reaction. Equity and bond traders alike fear a more robust labor market will spur the Federal Reserve to tighten and begin unwinding one of the market's primary underpinnings.

Such concerns were evident Tuesday, when Fed Chairman Alan Greenspan's comment that "at some point" rates will "have to rise to a more neutral state" sent major averages down sharply while Treasury prices slid. Stock proxies meandered in a tight range Wednesday and were similarly trendless midday Thursday.

The recent drop in weekly jobless claims and improvement in the employment component of the ISM manufacturing index "suggest that the risk for the most pain for investors is with a stronger, not weaker, employment release," predicts John Silvia, chief economist at Wachovia. "That type of news will upset both the market's and the Fed's complacency on the strength of the economy and the job market."

Conversely, if Friday's employment report proves disappointing, traders might rejoice that the "bad news" for American workers means the Fed will remain sidelined, i.e. good news for investors and speculators. (Of course, a substantially weaker-than-expected report might not spur a rally.)

Whose Market Is It, Anyway?

Many pundits repeatedly point out that the majority of American households own stock, either directly or indirectly. Thus, the interests of Main and Wall Street are closely aligned, the thinking goes.

But if we truly are a nation of investors, some investors are more equal than others.

"The direct ownership of publicly traded stocks is more widespread than the direct ownership of bonds, but it is also concentrated among high-income and high-wealth families," the Fed found in the 2001 survey of consumer finances. "Because a disproportionate share of equities and other business assets is held by relatively wealthy families, the adjustment in values affects them disproportionately."

There isn't more recent data, but the 2001 survey provides clues why the general public isn't feeling as bullish as Wall Street -- and why high-end retailers have been on such a tear. Yes, equity mutual fund inflows are up, but so is the public's anxiety about the economy's trajectory. The expectations component of the Conference Board's consumer confidence index tumbled 10% in February.

"Consumers remain disheartened with current economic conditions ... and their short-term outlook turned less optimistic," the Conference Board said in an accompanying statement.

The vicious bear market of 2000-02 clearly contributed to the public's apparent disconnect from the stock market's recovery. Even if Americans never abandoned the stock market, it has become a less-critical part of household wealth vs. the bubble's peak.

At the end of 1999, equities totaled a record 40.8% of households' total net worth, according to the Fed's flow of funds data. At the end of 2002, it was down to 25.3%, the lowest since 1994, Kasriel noted. At over 33%, real estate is again the highest component of household wealth.

Given the importance of real estate, refinancing activity and home-equity extraction to consumer spending, it seems that Main and Wall streets do share the same long-term interest rate risks, even as they have seemingly drifted apart of late.