NEW YORK ( TheStreet) -- The monthly market catalyst known as the government jobs report (and its obsessively followed unemployment rate) is due out on Friday morning. This time around, the nonfarm payroll data is contending with the European debt contagion in its attempt to keep its regular role as a heavy influencer of trading action.

Will an improvement in nonfarm payroll data -- and the consensus has ticked up this week from 180,000 jobs added to 187,000 jobs -- be able to stop the correction that has lopped off more than 5% of the S&P 500 in the past week, and completely wiped out 2010 gains in world indexes?

If the relative influence of other recent positive data points coming out of the U.S. is any indication, the government jobs report will have a tough time stopping the current European-debt triggered market correction.

Automatic Data Processing reported that private sector jobs grew by 32,000 in April, while layoffs fell to a nearly four-year low.

The ISM manufacturing data came in this week all positive, too, with a primary manufacturing index number above 60, the highest index number since June 2004.

Even so, neither positive data point about the U.S. economy had the power to change the market message of the week: "sell, sell, sell."

The 32,000 jobs reported by ADP was the biggest increase since January 2008, and followed a revised 19,000 gain the prior month.

Art Hogan, chief market strategist at Jefferies, said the market largely has been ignoring constructive news, including the fact that the consensus number on the jobs report has moved up this week. "It's the most important piece of economic data we get every month. This time, we're throwing out a 5% correction even before the printed number comes out."

The monthly government jobs report has more leverage as a market catalyst than the ISM or ADP data. Economists don't doubt the jobs number's influence, even amid the negative trading sentiment in the equity markets, but were wondering just how good the printed number would have to be for the markets to rally.

The Jefferies economist thinks that due to the correction, the nonfarm payroll number may provide a credible opportunity for upside, and to shift the focus away from the euro.

Robert Pavlik, chief market strategist at Banyan Partners, said the monthly government jobs number seems to carry so much weight every time it comes up, the best way to think about it ahead of Friday's printed number is as a data point the Street is looking to as a potential stopgap for the European debt correction.

Jefferies' Hogan said that any number between 175,000 and 250,000 jobs added would be plenty of good news, whereas anything short of that type of number would probably be considered in line, and given the situation in Europe, unlikely to change the overriding market psychology. A number below 100,000 jobs added ... economists don't even want to go there, and don't expect it either.

The Banyan strategist said "a dramatic increase" over the consensus number of 187,000 could give some direction back to the market. "We blew through the ISM manufacturing report fairly easily, as if it didn't even matter. The trade right now is just sell the market and take profits and wait for a better day," Pavlik said.

Therefore, a strong jobs number could lead to short covering and put to bed fears that the 5% correction is headed for a 10% correction before it's over.

Nevertheless, Bayard's Pavlik isn't ruling out the potential downside from any weakness in the jobs number compounding the correction. "Anything below 187,000 and any additional negative revision to the previous month's number, and that might bring us down," Pavlik said.

Last month, the government jobs report showed an increase of 162,000 jobs.

Census jobs will again feature prominently in the monthly nonfarm payroll number. Last month, 75,000 jobs were Census hires, and a similar, or at most slightly lower number, is expected to be featured in Friday's jobs report, too.

The unemployment rate of 9.7% is expected by most market watchers to remain the same with the monthly government jobs report.

The Labor Department released its weekly employment report Thursday, showing that initial claims for jobless benefits declined by 7,000 to 444,000 in the week ended May 1.

The previous week's initial claims number was revised slightly upward to 451,000 from 448,000.

The Labor Department's report showed that the four-week moving average, considered the most important data point in showing employment trends, fell for the week ended May 1 by 4,750 to 458,500, from the previous week's revised average of 463,250.

The Labor Department report also showed that the number of continuing claims fell by 59,000 to 4,594,000 from the preceding week's revised level of 4,653,000. Yet overall, a Labor Department economist described the weekly numbers as "uneventful."

High-profile private companies are again hiring, a trend noted in comments made by Warren Buffett, the chief executive of Berkshire Hathaway ( BRK.B) at his company's annual meeting last weekend. Berkshire Hathaway had been shedding jobs through the end of 2009, but has now returned to being a net hirer.

Yet that's just one more positive data point coming out of the U.S. at a time when fear is reigning supreme in the markets.

The government jobs report has a tough test of its power set for Friday.

"The situation in Greece is unbelievably tenuous, and people are treating it as if it will derail the global economy. I disagree, but it means that the European debt fears could stay with us longer than we thought they would," Banyan's Pavlik said.

-- Reported by Eric Rosenbaum in New York.


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