By Jeff Cox, CNBC.com Senior Writer
NEW YORK ( CNBC) -- Friday's likely weak jobs number will provide a key test for the market, namely whether stocks can trade higher even when one of the economy's key components is unlikely to show improvement anytime soon. Economists expect the nonfarm payrolls report to show a gain of 60,000, a number that probably will not move the unemployment rate lower and may even be an optimistic view of the jobs market. Indeed, a deeper view shows that the employment in September likely was about the same as it was in August -- stagnant with a bias to the downside.
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Structural unemployment refers to jobs that are not lost merely because of basic seasonal or other trends, but rather are more long-lasting and symptomatic of deeper economic distress. The Congressional Budget Office has put the structural rate at 5.2%. But Dales said it could be higher due to the amount of displaced workers -- in the construction industry, for instance -- who lack the skills and training to compete in the technologically advancing workplace. "Normally this isn't too much of a problem, as the unemployed just move to where the jobs are," Dales said in a note. "But labor mobility is currently being hampered by nearly a quarter of mortgage borrowers having a mortgage with more value than their home. They cannot move without incurring a significant financial loss." Treasury receipts also show a weakening jobs market. Tax withholdings compared to a year ago are up only 5.9%, down from the 8.8% growth in August, further signifying a slowdown. "And you know how the August data turned out -- no job creation," Nicholas Colas, chief market strategist at CovergEx in New York, said in his daily note. "Consensus expectations of 60,000 jobs added, give or take, for Friday may well be a bit optimistic." Similarly, Wednesday's report from ADP and Macroeconomic Advisors showed 91,000 private-sector jobs added -- just 2,000 higher than August and a number that doesn't include the high level of government job cuts, which have averaged 67,000 a month. One of the few bright spots is that striking Verizon ( VZ) workers are back on the job. But even last week's sub-400,000 reading on the weekly jobless claims number was largely dismissed as a technical drop due to seasonal distortions and an large number of people out of work due to weather-related issues. Finally, Wednesday's Institute for Supply Management nonmanufacturing data provided no comfort. The reading was slightly above expansion levels for the economy, but the employment index came in at 48.7, a sub-50 reading that indicates contraction. There still, however, remain some job optimists, at least relatively speaking. Goldman Sachs, despite predicting Tuesday that the jobless rate will hit 9.5% in 2012 from its current 9.1%, said Friday's number could be better than expected. Nomura Securities, meanwhile, affirmed its higher-than-consensus estimate of 80,000 new jobs. Investors, then, will be left to parse whether corporate strength will be enough to offset consumer weakness. With the market fixated on each twist and turn in the European debt crisis, the last thing investors want to worry about is another downturn in the labor picture. "The big lid over this market right now is how much counterparty risk we have with what's ongoing on an international basis," BPU's Baum says. "They don't want to wake up every morning with headline risk. Until you get through it, you're going to have choppy markets." -- Written by Jeff Cox, CNBC.com Senior Writer