Friday's Jobs Report: Markets Bracing for More Bad News

Friday's employment report is expected to show a gain of only 75,000 nonfarm jobs during August, with the unemployment rate steady at 9.1 percent.

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While the report is always important, Wall Street and economists will pay particular attention to whether businesses pulled back on hiring last month in response to the plunge in stock prices and the gloomy economic outlook.

Recent employment indicators suggest "zero growth in private payrolls," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. "If that comes to pass we are going to have some big disappointments tomorrow."

The government reported Thursday that jobless claims dropped 12,000to 409,000 last week, offering no sign that layoffs have picked up due to slumping business and consumer confidence. But claims are still above 400,000.

Many economists have been slashing their forecasts for U.S. employment and economic growth in recent weeks. Economists at Goldman Sachs cut their forecast for August payrolls growth to 25,000 from 50,000, citing weakness in online job postings in recent months.

Even the White House issued a gloomy report on Thursday that predicted a 9 percent unemployment rate in 2012, when President Obama faces re-election.

Still, recent data suggests the July-September quarter is off to better start.

Employers added 117,000 net jobs in July, about double the pace of the previous two months. Consumer spending rose that month by the most in five months, partly because Americans bought more cars and spent more to cool their homes. And businesses ordered more goods from factories, particularly autos and airplanes.

Even so, hiring has slowed since earlier this year, and the unemployment rate remains high. The economy added an average of 72,000 jobs from May through July, down from an average of 215,000 per month in the previous three months.

More jobs are needed to fuel faster economic growth. Higher employment leads to more income. That boosts consumer spending, which accounts for about 70 percent of economic growth.