December jobs report risks disappointing optimistic market

December's employment report should show broad-based job growth of more than 200,000, but it could pale in comparison to November's robust report and disappoint some of the loftier expectations in the market.

Economists expect a consensus of 240,000 nonfarm payrolls, and the unemployment rate is expected to fall to 5.7 percent, from 5.8 percent. November's 321,000 nonfarm payrolls could also be revised lower, and it's possible that a big monthly pop may have taken some jobs away from December.

Stocks bounced in part this week on optimism about jobs, after ADP reported that private sector payrolls grew by 241,000, slightly more than expected. However, economists say that does not necessarily translate to a better government report.

The jobs report is particularly important since the markets are watching it for an update on the key labor indicators that could sway the Fed in its decision on when to start raising interest rates.

"Here's the thing. (Fed Chair) Janet Yellen came out very hawkish after the meeting and said basically she was only giving us a free pass for the next two meetings. If we have a very hot number, could easing be pulled forward? Sure it could, if she lines up her actions with her words," said Mike O'Rourke, chief market strategist at JonesTrading.

Strategists say they are watching other facets of the employment report that could provide more clues as to what the Fed is thinking about the labor market. Wage gains is one area economists are watching, as well as the unemployment rate.

There are also a series of revisions expected with Friday's report. "Normally, we just look at the revisions to October and November and look at the first print to December. Now we're going to look to the whole year of revisions," said Rupkey. "The unemployment rate is what the Fed is using to guide their policy. If it's lower, the closer it gets to 5, the Fed's got to start lifting rates. That's the biggest number to watch."