The ADP national employment report shows private payrolls up 106,000 in January after an upwardly revised 253,000 in December. The January reading is below the consensus of up 158,000 in an Econoday survey. The ADP attributed some of the softer pace of hiring in January to extreme weather events in California and winter storms in the central and eastern US. Payrolls typically bounce back in the subsequent month when this is the case.

Goods producers' payrolls declined 3,000 in January from decreases of 2,000 in natural resources/mining and 24,000 in construction, while manufacturing added 23,000 jobs. Service providers' payrolls rose 109,000, kept in check by a 41,000 decline in trade/transportation/utilities."Other" services were unchanged. The largest increase was 30,000 in financial activities.

January payrolls are down 75,000 for small businesses (1-49 employees), up 64,000 for medium-sized businesses (50-499 employees), and up 128,000 for large firms (500+ employees). Some of this may be due to smaller businesses feeling the pinch of a slower economy and persistent inflation, and a continued lack of qualified applicants for open jobs.

Wage growth was up 7.3 percent for job-stayers in January and up 15.4 percent for job-changers. The difference highlights why many employees remain in the job market despite improved wages and benefits offered to retain the current workforces. Smaller firms cannot match the pay increases offered by larger companies. In January, the smallest firms (1-19 employees) lift wages 5.5 percent for job-stayers and the next smallest (20-49 employees) give increases of 7.0 percent. Medium-sized firms (50-499) lift pay by 7.6 percent in January and large establishments (500+ employees) give raises of 7.7 percent.

Forecaster see ADP's January employment number at 158,000. This would compare with December growth in private payrolls reported by the Bureau of Labor Statistics of 220,000. ADP's number for December was 235,000.

The national employment report from Automated Data Processing Inc. is computed from ADP payroll data and offers advance indications on the U.S. workforce. ADP's data cover more than 500,000 companies totaling more than 25 million employees. The report is produced by ADP Research Institute in collaboration with Stanford Digital Economy Lab.

Market players have become accustomed to the excitement on employment Friday and realize the rich detail of the monthly employment situation can help set the tone for the entire month. While economists have improved their nonfarm payroll forecasts over the years, it is not unusual to see surprises on employment Friday. To that end, the ADP's national employment report can help improve the payroll forecast by providing information in advance of the employment report.

The employment statistics also provide insight on wage trends, and wage inflation is high on the list of enemies for the Federal Reserve. Fed officials constantly monitor this data watching for even the smallest signs of potential inflationary pressures, even when economic conditions are soggy. If inflation is under control, it is easier for the Fed to maintain a more accommodative monetary policy. If inflation is a problem, the Fed is limited in providing economic stimulus.

By tracking jobs, investors can sense the degree of tightness in the job market. If wage inflation threatens, it's a good bet that interest rates will rise; bond and stock prices will fall. No doubt that the only investors in a good mood will be the ones who watched the employment report and adjusted their portfolios to anticipate these events. In contrast, when job growth is slow or negative, then interest rates are likely to decline - boosting up bond and stock prices in the process.