NEW YORK ( TheStreet) -- The first week of the new year brings a busy economic calendar with the power to move the markets.

The week will culminate Friday with the ever-important nonfarm payroll report for December and Federal Reserve Chairman Ben Bernanke's testimony in front of a Senate budget panel.

The employment report has been a thorn in the side of the bulls. The report for November came in shockingly weak, with only 39,000 jobs added to nonfarm payrolls, and traders are anxiously looking for a rebound.

In the run-up to the nonfarm payrolls report, other economic reports will help economists and traders refine their predictions for it.

First up will be the Institute for Supply Management's (ISM) manufacturing index for December, due out Monday at 10 a.m. EST. Economists are predicting a small improvement in this gauge of national manufacturing activity. Last week, the Chicago PMI came in better than expected, and that has provided a little more optimism that the ISM report will get the markets off to the right start in 2011.

"A strong ISM reading could make me a little more optimistic about the nonfarm payroll number," said Ellen Beeson Zentner, senior U.S. macro economist for the Bank of Tokyo-Mitsubishi UFJ.

Zentner noted that even though last week's ISM Chicago reading is a manufacturing index, its details include retail-sector jobs. At the national level, retail is a key driver of the labor outlook, so the strength in the ISM Chicago report was "generally encouraging for the overall numbers," she said.

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In a more labor-specific read-through for nonfarm payrolls, ADP will release its private-sector payroll report for December on Wednesday. The consensus is for a pullback to 75,000 jobs from the 93,000 reported for November.

Economists are quick to point out, however, that the ADP report can be the proverbial curveball.

"ADP hasn't always been good at giving an indication of how nonfarm payroll will come in," says Wayne Kaufman, chief market analyst at John Thomas Financial. November was one prominent example.

The Bank of Tokyo's Zentner adds, "It's a judgment call each month whether we use ADP or not, but when ADP surprises one way or another to upside or downside in a big way, it tends to be an indicator for nonfarm payroll."

Nevertheless, "The downside risk for a bad nonfarm payroll report decreases with better ISM and ADP numbers," Zentner maintains.

The consensus number for the nonfarm payroll report is 111,000, up from 39,000 in November.

The real question about the report is not whether it beats the consensus, but whether it makes that November reading seem like an anomaly as opposed to a harbinger of worse-than-expected conditions in 2011. Economists also note that even after the weak nonfarm payroll number in November, the markets ultimately shrugged it off and kept moving up.

"I like to believe the number is not going to be too bad. My thinking is that it's like to be a nonevent compared to last time," says John Thomas Financial's Kaufman. The economist thinks it's more important that the nonfarm payroll number not disappoint. "Somewhere in the ballpark of expectations is the important thing. No strong negative and I think the markets will be happy," Kaufman says.

Bank of Tokyo's senior U.S. macro economist Zentner says to be really convincing in terms of job growth, nonfarm payrolls need to add at least 150,000 jobs to be considered strong, and it's really the 200,000-job mark that's an undeniable sign of employment recovery. Yet even falling short of the consensus shouldn't result in a huge knee-jerk reaction from the markets, she adds.

"I'm hoping the December number bests 150,000, but I'm not that optimistic right now. I'm at 100,000," the economist said, though she added that as the week's earlier data comes in, economists such as herself will be revising their nonfarm payroll estimates.

"Economists will be revising forecasts all the way through Thursday night," Zentner said. She also expects an upward revision to November's disappointing nonfarm payroll number.

The question-and-answer session that follows Ben Bernanke's Senate testimony Friday should provide some room for interesting commentary. Market participants will also note how his testimony compares with the minutes from the most recent Federal Open Market Committee meeting, which will be released on Tuesday.

Traders and economists will peruse the minutes for any discussion that recent economic data show improvement. The last FOMC minutes caught some traders flat-footed because they did not mention some of the better data.

"The Senate testimony is more important, because the Q&A could force Bernanke to acknowledge the flood of positive data toward the end of the year, and what it means for QE2," says Zentner. The implication is any signal from the Fed that it might put the brakes on QE2 sooner than expected. "We think QE2 will play out to the end of the year, but in the least, the recent economic data lessens the chance of a QE3 or QE4," the Bank of Tokyo economist says.

In the end, Kaufman at John Thomas Financial thinks that for all the attention that Bernanke and nonfarm payroll garner, it's really the earnings season -- which officially kicks off Dec. 10 with Alcoa's ( AA) report -- that will set the trading tone for 2011.

"I don't think there's anything better telegraphed than the Fed," says John Thomas' Kaufman. "The Fed has done everything possible to let everyone know where they stand ... Trading will stop for a few minutes and then traders will get bored with it and go back to trading."

Kaufman thinks the economic indicators won't be the major short-term movers of the market at the beginning of 2011, barring any big surprise.

"The market is either overbought or oversold," the market strategist says, and the Alcoa report will give traders a first read of stock outlook for 2011. "This rally keep going based on earnings report in January. That's it. If the January reports come in and make or beat numbers like they've been doing and provide decent forecasts, just decent, than the markets look undervalued, and that's the bottom line."

-- Written by Eric Rosenbaum in New York.

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