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Time to torture the data!

Wall Street will have the red-hot irons and the Spanish boots out in full force tomorrow morning trying to extract the last bit of information out of the initial claims for unemployment number that will be released at 8:30 a.m. ET.

The hope will be to bend, spindle, and mutilate the data until it tells whether or not unemployment has peaked—or is about to peak—much earlier than expected.

That was certainly the implication of last Friday’s surprisingly low number of jobs lost in November—just 11,000. Most economists had been expecting that unemployment wouldn’t peak until the middle or end of 2010. The November job loss number suggested that the peak could come earlier. Maybe as early as the first quarter of the year.

The implications, if that’s true are huge. They include a stronger than expected economic recovery; a faster than expected turn in Federal Reserve policy toward raising interest rates; and a switch from a falling to a strengthening dollar.

What has the initial claims number been telling investors recently?

Well, it seems, and I stress seems because this number is really volatile in the short run, that the initial claims number supports the thesis that unemployment will peak sooner than expected. Initial claims came in at 457,000 for the week that ended on November 28. That was below expectations of 480,000 initial claims and it kept the number on the downward track that saw claims break below 500,000 for the week of November 14.

One big problem with last week’s number is that it came on a short week, one with Thanksgiving in it, so skeptics who wanted to doubt the number had an easy reason to do so.

Which would make tomorrow’s number important even without the questions raised by Friday’s monthly job loss report.

The consensus is calling for a slight drop to 455,000 initial claims for the week that ended on December 4.

No matter where the number comes in, it has the power to move the financial markets.