Last Thursday, in "Bernanke's Boogeyman: The Japan Scenario," I highlighted the pick-up in volatility in Japan's stock and bond markets. Today, Japanese equities were at it again, with the Nikkei 225 dropping 3.7% for a 15.1% decline from its May 22 closing high.

While the Nikkei's drop appears to have rattled Asian markets, U.S. investors look less concerned: The S&P 500 (SNPINDEX:^GSPC) and the narrower, price-weighted Dow Jones Industrial Average (DJINDICES:^DJI) have gained 0.22% and 0.55%, respectively, at 10:10 a.m. EDT.

U.S. unemployment matters even more this month
Japan can't hog the spotlight, though; the U.S. has an opportunity to create some volatility of its own this week. The big number investors worldwide will be watching is the U.S. unemployment rate for the month of May, which the Bureau of Labor Statistics will release this coming Friday at 8:30 a.m. EDT. That number is always important, of course, but the stakes are particularly high this month.

Why? Last December, the Fed explicitly tied its short-term policy rate, the federal funds rate, to unemployment, saying it would not raise the rate from its current range of zero to 25 basis points until the unemployment rate remained above 6.5%. At that time, with unemployment at 7.8%, most of the Fed's senior officials thought that goal would remain out of reach until the end of 2015. The following graph, which charts the U.S. unemployment rate, shows just how persistent unemployment has been over the past several years (the vertical bars represent recessions):

US Unemployment Rate Chart

US Unemployment Rate data by YCharts.

At the trough of the 1981 to 1982 recession -- prior to the credit crisis, the longest-lasting recession since the Great Depression, at 16 months -- unemployment peaked at 10.8%, above the 10% high registered in October 2009. Despite this, the unemployment rate came down faster than it has in the aftermath of the financial crisis, taking 18 months to reach 7.4%. By comparison, since October 2009, it has now taken us 42 months to reach 7.5%.

Last month, the yield on the 10-year Treasury bond jumped from 1.63% to 2.16%. That suggests the markets now think short-term rates will rise earlier than had been anticipated (long-term rates reflect expected short-term rates). Strong employment data on Friday would confirm or amplify that assessment. That would be negative for bonds, but the impact on stocks is less obvious. Either way, investors ought to be prepared for some volatility leading up to, and following the release of, Friday's big figure.

Fool contributor Alex Dumortier, CFA has no position in any stocks mentioned; you can follow him on LinkedIn. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.