The ADP national employment report posts a gain of 242,000 in private payrolls in February after a small upward revision to 119,000 in January. The reading is above the consensus of 200,000 in an Econoday survey. Although ADP says this number is not to be read as a forecast for the BLS change in private payrolls, it does suggest that expectations for a similar rise in the government report could be accurate. The Econoday consensus for the Friday payroll data is an increase of 213,000 in private jobs.

In the ADP report, goods producers' payrolls rose 52,000 and service providers added 190,000 jobs. For goods producers, construction payrolls declined 16,000 wile manufacturing rose 43,000 and natural resources and mining are up 25,000. Among service providers, the largest gains are 83,000 in leisure and hospitality and 62,000 in financial activities. The only category to decline is professional and business services at down 36,000. This likely reflects recent layoffs in the tech sector.

Small companies continue to face shortages of qualified workers and/or may be closing unfillable open spots or downsizing in anticipation of an economic downturn. Small companies' payrolls declined 61,000 in February. Mid-sized companies added 148,000 and large companies hired 160,000 new employees. Mid- and larger-sized firms are able to be more competitive on compensation and can attract and retain more workers.

The report noted that the median change in annual pay for those who changed jobs is a hefty 14.3 percent increase in February, while those who stayed in their present jobs get a still-sizeable 7.2 percent increase. The largest annual pay increase for those who stayed is a 10.1 percent raise in leisure and hospitality.

Forecasters see ADP's February employment number at 200,000. This would compare with January growth in private payrolls reported by the Bureau of Labor Statistics of 443,000. ADP's number for January was a lowly 106,000.

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.