Rising jobless claims and Wednesday's much weaker ADP private jobs report have severely diminished forecasts for the all-important Nonfarm Payrolls employment report coming out at 8:30 ET. Predictions were already low at the start of the week - averaging 190k versus 244k the month before - and now it's more common to hear prayers for anything above 100k.

"Last week, we had penciled in a below-consensus 170,000 gain in nonfarm payrolls, but following this week's cast of dismal economic characters, we'll be happy to take any six-figure number," said BMO Capital Markets an hour before the report.

RDQ Economics commented Thursday: "We look for private payrolls to have risen 150,000 in May, which compares to an average monthly gain of 253,000 over the last three months (and we see total nonfarm payrolls up 140,000)."

Nomura Global Economics added: "We expect tomorrow's nonfarm payrolls to show employment expansion, but not at the levels required for a robust jobs recovery. Our forecast is for a 85k increase in nonfarm payrolls; 110k rise in private payrolls; 10k decline in manufacturing employment; and, an unchanged unemployment rate (9.0%)." 

The Unemployment Rate is still widely expected to inch down to 8.9%.

Thirty minutes before the report, the benchmark 10-year Treasury yield is at 3.02%, versus 3.03% at Thursday's close. The two-year note remains at 0.46%, and the 30-year yield is down one basis point at 4.24%. Like Treasuries, mortgages are mostly flat. The FNCL 4.0 coupon is +3/32 at 96-28 and the 30 year FN4.5 is +1/32 at 100-27.

Equity trading is equally cautious: S&P 500 futures are 5 points lower at 1,307.50 and Dow futures are 32 points down at 12,207.

Commodity prices are lower. Light crude oil fell 0.79% overnight to $99.61 per barrel, and gold prices dropped 0.29% to $1,528.20 per ounce.

At 10am ET, the ISM Non-Manufacturing Index is supposed to do better in May compared to April, when a sharp drop-off pulled the index down 4.5 points to its lowest level since August. The median estimate puts the index at 54, up from 52.8 in April but below the 57.3 recorded two months before. The modest improvement would draw a start contrast with its manufacturing cousin, which on Wednesday plummeted to 53.5 from April's 60.4.

"The ISM non-manufacturing index likely gave up a bit more ground in May on some sogginess in the economy," said analysts at IHS Global Insight. "The services side of the economy and distribution are still growing, but the economy has lost momentum."

Economists at Citigroup pointed out that markets normally focus on the employment component of this report, but with the nonfarm payroll report coming out ninety minutes earlier, it probably won't command much attention.

Also at 3:30pm ET, Eric Rosengren, president of the Boston Fed, speaks to the Stanford Finance Forum in Stanford, California.