The ADP national employment report shows 278,000 private jobs added in May, down somewhat from a small downward revision to 291,000 in April. The number of jobs is well above the consensus of 160,000 in the Econoday survey of forecasters.

Goods producers added a net 110,000 jobs in May with a decline of 48,000 in manufacturing partially offsetting increases of 64,000 and 94,000 in construction and natural resources/mining, respectively.

Service providers added a net 168,000 jobs in May with most from a 208,000 increase in leisure/hospitality employment, followed by increases of 32,000 in trade/transportation/utilities and 12,000 in"other" services. There are modest decreases in the remaining categories. Financial activities are down 35,000, education/health services down 29,000, information down 15,000, and professional/business services down 5,000.

The report indicates that while larger businesses are laying off workers, smaller ones are benefiting by the easing in the labor market. Large establishments (500+ workers) payrolls are down 106,000, while medium establishments (50-499) added 140,000 jobs and small establishments (1-49) added 235,000 jobs. Smaller businesses have been at a competitive disadvantage during a period of high demand for labor while the supply was low. Restructuring and consolidation in several industries could be giving smaller firms the chance to fill open positions with wage pressures easing.

The ADP report said that the median year-over-year increase in wages for job-stayers is 6.5 percent in May, cooling the fourth month in a row. The median year-over-year increase in wages for those changing jobs slowed to a still-elevated 12.1 percent in May, down from 13.2 percent in April. The pace is slower for the sixth straight month.

Forecaster see ADP's May employment number at 160,000. This would compare with April growth in private payrolls reported by the Bureau of Labor Statistics of 230,000. ADP's number for April was 296,000.

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.