This Friday will bring the Employment Situation report from the U.S. Labor Department. Ben Bernanke and team at the Federal Reserve have only had to worry about their employment target, since inflation has been low. The question is whether the jobs report for November will be strong enough to wreck the bull market’s trajectory going into the end of the year. We are not trying to predict the news ahead of time in this observation, but the risks seem more to the downside than they do to the upside for how the market will react.

Bloomberg is calling for the unemployment rate to dip back down to 7.2% in November from 7.3% in October. The nonfarm payrolls are expected to have grown by 180,000 in November, versus 204,000 in October. Private sector payrolls are anticipated to be 173,000 in November, versus 212,000 in October.

Pay close attention here. The October reports on payrolls were significantly better than expected. In fact, they were so strong in comparison that it was as if employers were totally ignoring the financial media’s coverage of the government shutdown and debt ceiling impasse.

With things looking better than worse in November, should we really be looking for payrolls to have contracted? Maybe the October numbers will be revised lower. That could explain a lot. If the payrolls report comes out without a much lower revision, and if they come in flat or above these estimates, then the logic likely will prevail that the Federal Reserve can finally begin the tapering of the $85 billion in bond purchases each month.

Remember: The stock market and bond market are addicted to stimulus, and quantitative easing has bolstered quite a bit of risk taking. You will get several first looks or previews to the employment report this week. Be warned that these missed the mark last month, but here are the other pre-unemployment reports due (with Bloomberg estimates):

• ADP Employment Report (Wednesday 8:30 a.m.): est. 185,000 versus 130,000 last month
• ISM Non-Manufacturing, employment index included (Wednesday 10:00): no est. on employment component
• TrimTabs payrolls estimate (Thursday morning): no est.
• Challenger Job Cuts report (Thursday 7:30): no est.
• Weekly Jobless Claims (Thursday 8:30): est. 322,000 vs. 316,000 last week
• Gallup U.S. Payroll to Population (Thursday 8:30): no est.

Again, the market is in the mood that numbers coming out too strong are bad because the Fed will ramp up a tapering of the quantitative easing. The markets want to see anemic growth numbers at this point.

A couple of other issues are putting Friday’s reaction at risk as well. The first week of December usually comes with the start of investors locking in gains and taking the few losses they can to offset their tax liabilities. A second issue is that stocks are acting as though they just need a breather as the Dow Jones Industrial Average and S&P 500 are both up well over 20% in 2013, as the S&P 500 eclipsed 1,800 and the DJIA eclipsed 16,000. Profit taking may rule the day here, and any post-payrolls strength may just bring in an excuse to sell into strength.

Again, we are not trying to forecast that Friday will be a bad day for sure. This is just how things look right now, and they could easily change if the pre-payroll reports change the bias. Stay tuned.

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