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"First time jobless claims are elevated. They're not down at 250,000, 260,000," said Chris Rupkey, chief financial economist at MUFG Union Bank. "The layoffs seem to be growing."
Rupkey expects 190,000 jobs but says it's possible it could be much lower.
"If it does print, sub-200,000 I think it's going to worry the Fed," he said. "If jobs are below 200,000, it's going to cause some more financial market turmoil. Stocks are probably going to get hit and bonds are going to rally. It's not going to take a lot. The market is biased to think a recession is looming on the horizon. This might be one of the first times we talk ourselves into a recession."
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U.S. nonfarm productivity fell in the fourth quarter at its fastest rate in more than a year, and led to a jump in labor-related production costs. The Labor Department said on Thursday that productivity, which measures hourly output per worker, declined at a 3 percent annual rate, the biggest drop since early 2014.
Rupkey said the backward-looking data showed hourly compensation - workers' wages - were better than expected, increasing 3 percent last year. He said higher wages and the unemployment rate at 5 percent could be signaling a peaking of employment.
"Whenever we get to full employment, which is roughly 5 percent, historically the jobs gains tend to slow. I think we've grown that in the many, many years since the 2009 end-date of the recession, so it could start to slow," he said.
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Michelle Meyer, deputy head of U.S. Economics at Bank of America Merrill Lynch, agrees the peak of hiring could be near, with the sharp contrast between last year's 200,000-plus monthly hiring pace and sluggish GDP growth.
Meyer said she expected just 170,000 jobs for January.
"You could imagine (declines in ) manufacturing, and construction, due to weather, but it's what's happening in the services that's really important," Meyer said, noting she would focus on retail and other sectors in the service sector.
Bank of America sees a 20 percent chance of a recession this year, and while it's unlikely there is a recession looming for 2016, Meyer said the softer data could be signaling that it's getting closer to the time when a recession would occur in 2017 or later.
"Given how negative sentiment is right now, with the steady flow of weak data, I think a negative number would end up moving the market," she said.
As for the Fed, she added that the market has already priced out any hikes for this year.
The Fed has forecast four rate hikes for 2016, but comments from New York Fed President William Dudley Wednesday were particularly dovish and reinforced the notion the Fed may not hike soon. Dudley pointing to concerns about worsening financial conditions.
"Now that the Fed has taken the first step of hiking, and it's quite clear there's diminishing returns of any additional easing, I think it would be hard for markets to feel good with the idea of Fed easing again," Meyer said.
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The Fed next meets in March, but Fed chair Janet Yellen speaks before Congress next week and the markets will be watching closely for her comments on the economy.
"Let's see what happens tomorrow. The Fed's kind of historically split here, where there's hardened positions on both sides. For many of the members of the dovish slant they want to see job creation continue at the rapid pace of last year, but for others on the Fed that's not a condition," said Rupkey.
Besides the 8:30 a.m. ET jobs report, there is international trade at 8:30 a.m. and consumer credit at 3 p.m.
Earnings are expected from CME Group, Estee Lauder, Moody's, Tyson Foods, and Weyerhaeuser. BNP Paribas, Nippon Telegraph and Toyota Motors also report.