For traders on Wall Street, the employment report due out before the opening bell Friday likely will mark the end of any holiday lethargy left over from Independence Day.

The Labor Department is expected to report that the U.S. unemployment rate held steady in June at 4.6%, a historically low level. Average hourly earnings are expected to have ticked up 0.3%, which would mark a quickening from May's pace of 0.1% and a possible sign of inflationary pressures.

But the key measure in the report will be June's nonfarm payroll survey, which economists project will show the addition of 160,000 jobs. That figure would signal a pickup from last month's anemic 75,000 jobs added, but it still falls short of the 200,000 bar that the market views as the dividing line between strength and weakness.

"You probably need at least 150,000 to keep things stable, or pick things up depending on where you are in the economic cycle," says Joel Naroff, chief economist with Naroff Economic Advisors. "Between there and 200,000, results are considered soft, and that's where we want to be at this late stage of the economic cycle because of the Federal Reserve's hawkish stance on inflation."

While the Fed softened its stance on inflation and monetary policy at its recent meeting, which marked the 17th straight time in which the central bank hiked interest rates by a quarter-point, investors still are touchy about the possibility of further tightening.

Each month that the Fed continues to raise rates, the odds get better that less liquidity available to borrowers will push the economy into a downturn that could set the stage for a bear market. On the flip side, if the Fed keeps the cash flowing, the economy could overheat, unleashing inflationary pressures that could make for a nightmare economic scenario.

Because employment is widely viewed as a key indicator of the economy's vitality, a jobs number of over 200,000 in June might ensure future rate hikes and send investors scurrying out of their positions Friday. That selloff would be exacerbated if there were signs that wage growth is picking up.

The current scenario, where a strong jobs market is viewed negatively by a forward-looking stock market worried about inflation, is a sign that the economy is in the late stages of its growth cycle. But such conditions have been around for roughly a year. That begs the question: Where exactly is the economy in its cycle?

Friday's fresh data will push some speculators to place their bets. Naroff says he sees the economy slowing, and the nonfarm payroll tally for June should be around the 200,000 mark. Meanwhile, he says the actions taken by the Fed in the coming months will make the difference between a hard landing a soft landing.

"The Fed has become a wild card here by creating uncertainty about what it's going to do," says Naroff. "I'm forecasting a 25% to 30% chance of a recession in 2007, and that's significant."

For his part, John Bollinger of Bollinger Capital Management says the economy will surprise on the upside, and investors should embrace strong growth.

"The economy and employment have surprised on the upside time and time again," says Bollinger. "Everyone keeps expecting economic growth to be worse than it's been, and they've been wrong. I think growth is still a good thing."