The monthly jobs report has always been a big event, but this time, the stakes are higher. The outlook, however, is gloomier.

Scheduled to be released on Friday morning, the August jobs number is due 10 hours after President Barack Obama accepts the Democratic nomination for re-election. The timing has made the result crucial to Obama's post-convention momentum.

Friday's jobs report will immediately turn the focus away from the "forward-looking" message Obama will deliver in Charlotte, N.C. If the Labor Department's report shows a notable improvement in job creation, it could lend momentum to the Obama campaign. Another bad month could do the opposite.

For the Federal Reserve, Friday's August jobs number will be the last major data point for the central bank's policy-setting body to consider ahead of the Sept. 12-13 Federal Open Market Committee (FOMC) meeting, so there will be speculation about what the numbers spell for another round of quantitative easing, or QE3.

Employers are expected to have increased payrolls by 125,000 workers last month, according to the median forecast of economists surveyed by Reuters ahead of Labor Department figures due on Sept. 7, a step down from July's 163,000-job gain. The public sector will continue to shed jobs, with a decline of 12,000 expected in August.

Roughly 12.8 million Americans are currently unemployed. And of the 8.8 million jobs lost during the recession, only about 4 million have been added back.

The unemployment rate is seen holding steady at 8.3 percent. It has stayed above 8 percent since February 2009, the longest stretch in monthly records going back to 1948.

Before the recession, the unemployment rate was generally at around 5 percent. At the current pace of job creation, it'll take until 2020 for the jobless rate to return to pre-recession levels, according to the Atlanta Fed's Jobs Calculator.

Fiscal Cliff

Hiring has cooled significantly to an average of 105,000 per month over the last three months from 226,000 in the January-March period. Economists blame the uncertainty generated by the so-called U.S. fiscal cliff - the $500 billion or so in expiring tax cuts and deep government spending reductions scheduled to take hold at the start of next year.

"The tax rises and spending cuts due to take place at the start of next year would be big enough to drive the economy back into recession, and it may already be prompting businesses to shelve hiring plans," Paul Dales, senior U.S. economist at Capital Economics, wrote in a note. "The negative impact on activity will only become more severe the longer Congress stalls and the closer we get to the end of the year."

Even if the U.S. does not fall off the fiscal cliff, economists say the threat that it could is one more reason to believe that gross domestic product (GDP) growth will remain muted in the second half of the year.

The Institute for Supply Management's business survey released this week further proved that the effects of the fiscal cliff are real.

Manufacturing, a pillar of growth of the early part of the recovery, shrank at its sharpest clip in more than three years last month.

The ISM reported its overall index of manufacturing activity fell to 49.6 from 49.8 in July. A reading of 50 or above indicates expansion, while below 50 means contraction. Economists expected a reading of 50. New orders, a sign of future production, also dropped.

The employment index showed firms hired the fewest workers in August since late 2009, a possible red flag for the August U.S. jobs report due on Friday.

Fed Signaling Loud And Clear

The Fed has recently been remarkably forthright about its future intentions. The statement released after the last meeting at the start of August concluded that the FOMC would "closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed."

The "closely monitor" language has previously been used to signal that the Fed was preparing to act. And ahead of the launch of QE2 in November 2010, the statement released at the meeting before that in September was amended to include a similarly worded pledge that the FOMC was "prepared to provide additional accommodation if needed."

The minutes from the last FOMC meeting in early August, released with the normal three-week delay, were even more forthright. "Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery." The key points being that a majority of voting members appeared to be in favor of action and not just if the economy showed further signs of deteriorating, but unless it showed a substantial strengthening.

More recently, Fed Chairman Ben Bernanke, in an Aug. 31 speech to central bankers and economists at an annual forum in Jackson Hole, Wyoming, said the lack of jobs is a "grave concern" and hinted that the Fed will provide additional policy stimulus as needed to promote a stronger economic recovery.

"The stagnation of the labor market in particular is a grave concern not only because of the enormous suffering and waste of human talent it entails, but also because persistently high levels of unemployment will wreak structural damage on our economy that could last for many years," Bernanke said.

Ethan Harris, co-head of global economic research at Bank of America Merrill Lynch, said a combination of sub-75,000 job growth and a rise in the unemployment rate would fuel expectations of QE3. Meanwhile, job gains of more than 150,000 and a fall in unemployment rate would reduce the likelihood of QE3 at the upcoming FOMC meeting.

Paul Ashworth, U.S. economist at Capital Economics, believes the August jobs report won't alter the bigger picture and that all evidence are already pointing to another round of large-scale bond buying.

Ashworth expects QE3 to be primarily focused on buying mortgage-backed securities, with purchases of longer-term Treasury securities playing a more minor role.

"Our best guess is that the Fed will pledge to buy at least $500 billion of assets," Ashworth said. "In a departure from QE1 and QE2, however, the Fed may announce a more open-ended program, with purchases of at least $50 billion per month until it decides that sufficient progress has been made in reducing the unemployment rate."

The Fed could also tweak its forward-looking rate guidance, with the pledge to leave rates at near-zero until late 2014 pushed back to mid-2015. Fed policymakers will likely make downward revisions to their growth forecasts and upward revisions to their unemployment rate forecasts.

"Regardless of what the Fed does, economic growth is likely to remain lackluster with no marked decline in the unemployment rate," Ashworth said.