Market Insider

You can feel the tension building ahead of Friday's jobs data. The November employment report will be a major factor driving Friday's markets and is also possibly the most important economic headline ahead of the Fed's interest rate decision Tuesday.

"I think it's super important," said Jared Berntein, senior economist with Economic Policy Institute. "I guess you could argue that it's always important but I think for the extent of the Fed rate cut, this is really the one big report left to factor into its thinking."

If the report is weak, Bernstein says you could argue the Fed may cut the fed funds rate by a half point, as some on Wall Street have been speculating. If it is strong, the odds are more likely to be a quarter point rate cut, or possibly no cut. Bernstein, a CNBC contributor, expects a quarter point cut.

The Wall Street consensus is for 85,000 new non-farm payrolls in November and an unemployment rate of 4.8 percent. In October, the unemployment rate was 4.7 percent and non farm payrolls came in at 166,000 though that number is expected to be revised downward to about 80,000, according to Dow Jones.

The consensus for non-farm payrolls was 77,500 just a few days ago, but several economists changed their forecast after ADP's jobs report Wednesday showed a sharp gain of 189,000 private sector jobs in November. Also important in that report was a slowing down of declines in construction and manufacturing jobs.

The ADP report is typically viewed as a preview of the government jobs report though it is not always an accurate reflection. Bernstein says he expects to see 60,000 to 70,000 non-farm payrolls for November. University of Michigan consumer sentiment is also reported Friday.

Who Would Know??
Who would have known how many individuals are just plain mad about the Bush Administration plan to help subprime borrowers avoid foreclosure! CNBC.com is being barraged by emails and by midday Thursday, about 80 percent of readers said the government should back off and let market forces solve the problem. The deal between the Administration and lenders would freeze interest rates for up to five years for some of the two million homeowners facing costly interest rate resets.

No coincidence the Mortgage Bankers Association reported Thursday that foreclosures rose to a record in the third quarter, including an increasing number in prime.

CNBC's Rick Santelli is someone who agrees with that majority. "This is a farce majeure," said Santelli. "Unilaterally voiding securities contract law is dangerous and I think it could be a big dollar negative. Even though the amount of resets that might be frozen could be small, it's a matter of principle."

Traders took the plan in stride. But there was an overall positive feeling that the government is alert to the problems in housing and is trying to do something about it. The "out of touch" feeling that we'd been hearing about both the Administration and the Fed has been fading since comments last week from Fed Vice Chairman Donald Kohn showed the Fed is well aware of how much the credit crunch is impacting markets and how the sick housing industry could topple the economy.

Federal Reserve Chairman Ben Bernanke gave his endorsement to the plan in a brief statement, calling it a "welcome step."

The markets also endorsed the plan. The Dow rallied 174 at 13,619, while the Nasdaq finished up 42 at 2709 and the S&P 500 was once more above 1500 at 1507, up 22. The unraveling of the flight-to-quality trade in the Treasury market was apparent. The yield on the 10-year climbed above 4 percent once more and was at 4.010 percent.

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