Friday's jobs report goes right to the heart of what's ailing the markets.
It's the fear that the economy is weaker than many are forecasting—and rising unemployment will only make it worse.
October's employment report is scheduled for release at 8:30 am EST. The consensus is for a loss of 200,000 non-farm payrolls, but some economists are ratcheting up their estimates to a decline of as many as 300,000 jobs.
"It's going to be pretty ugly," said Mark Zandi, chief economist at Moody's Economy.com. "The ISM surveys were very negative. The employment questions were very, very negative. It feels like it could go to 300,000 plus."
Mesirow Financial's chief economist Diane Swonk said she expects a decline of 250,000. Jobs have declined by a total 760,000 in the first nine months of the year.
Zandi said he expects the unemployment rate will move to 6.3 percent from 6.1 percent, and he expects it to peak at 8 percent at the end of next year. A wide variety of companies have been announcing cost-cutting plans that include significant layoffs in the last couple of weeks.
"They feel the panic and they know that things aren't getting better any time soon so they're battening down the hatches in preparation," Zandi said.
Other economic news Friday includes pending home sales at 11:30 a.m. and wholesale inventories at 10 a.m.
The auto industry, which went hat in hand to Washington Thursday, has two major earnings reports Friday. Ford reports before the bell, and General Motors reports later in the morning. GM is also expected to make an operational announcement, aimed at preserving cash.
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The auto industry has suffered tremendously in the latest turn of the credit crunch. Buyers had already pulled back because of high fuel costs and then were dealt the double whammy of limited credit, made worse after Lehman failed in mid-September. The industry is planning layoffs and those numbers could continue to climb.
Rep. John Dingell, D-Mich., said the meeting between House Democratic leaders and auto industry executives was productive. The industry is seeking another $25 billion. "We're at this really odd time in American capitalism where the cost of doing nothing is greater than doing something," said Swonk.
GM said the meeting was "frank and constructive" and that it needs federal aid to bridge a troubled period for the auto industry.
The fate of this industry is one of the unknowns when economists look at the jobs landscape. The shutdown of auto operations fans out across the economy, affecting auto suppliers and other related businesses.
Big questions in the markets since election day have been what will President-elect Barack Obama do about the economy and who will join his team. There are also concerns about the timing of when his economics team engages with the Treasury's program to bailout the financial system and other projects.
Some of those answers could come Friday afternoon when Obama holds a press conference at 2:30 pm EST after meeting with a group of economic leaders who make up his transition economic advisory board. The group includes investor Warren Buffett, former Treasury secretaries Robert Rubin and Larry Summers, Google Chairman Eric Schmidt, former Fed Chairman Paul Volcker and former SEC chairman William Donaldson.
"It would be good if Obama led..I think if he waits until inauguration day to lead, he's not going to have much to lead . He's got a window, and he's got to go through it quickly," said Zandi.
Veteran trader Art Cashin said he thinks investors are showing their concern in the stock market, and they are looking for some reassurance. "What's going on is in a vacuum. There are lots of rumors about what might be getting planned and what proposals there are and it's continuing to create nervousness," he said.
"Another concern in the markets is this.. You have about eight weeks before he officially takes office. What happens if there's another Bear Stearns or Lehman? How will that be organized?" asked Cashin, UBS director of floor operations.
"Will it look like two different fire brigades arguing in front of a burning building?" he said.
Stocks were whipped Thursday, losing about five percent. The market's two-day drop of 10 percent is the worst two-day decline in percentage terms since October, 1987.
Worry about the economy was a big factor. "Look at what Cisco said. The global economy and the American consumer hit an absolute stone wall at the end of September. They disappeared," said Cashin of U.S. consumers.
The market was reminded Thursday in a big way just what the consumer pull back means.
Chain stores' October sales reports painted a dismal picture of the consumer. Overall same store sales slumped 0.9 percent, compared to last year. That was the weakest reading for any October since the International Council of Shopping Centers started tracking the data in the 1930s. The ICSC said as a result of the weak sales reports, it cut its holiday sales forecast to an increase of 1 percent, down from 1.7 percent.
Walt Disney, when it reported its earnings after the bell Thursday, said its theme park bookings dropped off considerably in the past month. It said attendance fell off one percent in October, and holiday bookings are off two percent. Disney stock fell after it reported a 13 percent decline in net income and said advertising revenue fell off sharply at its television stations and slowed at its ABC broadcast network.
Other earnings news Friday includes Berkshire Hathaway's earnings after the bell, and morning reports from Sprint Nextel and Estee Lauder.
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