The ADP national employment report shows a solid gain of 164,000 in December after a negligible downward revision to 101,000 in Nover. The December gain is well above the consensus of up 115,000 in the Econoday survey of forecasters. The December increase reflects a still solid labor market with private businesses hiring where they can find qualified workers for open positions.

In December, goods-producers increased payrolls by 9,000, a gain that is entirely due to strong construction hiring of 24,000 that was offset by declines of 13,000 in manufacturing and 2,000 in natural resources and mining. Homebuilding and renovation and repair of existing units contributes to demand for skilled workers. Payrolls for service-providers are up 155,000 with broad-based gains let by an increase of 42,000 in education and health services and 59,000 in leisure and hospitality. The only service category to decline is a small dip of 2,000 in information services.

Payrolls are up in all sizes of businesses. Small establishments (1-49 workers) are up 74,000, medium-sized businesses (50-499 workers) added 53,000 workers, and large firms (500+ workers) are up 40,000. This continues a trend where smaller firms are better able to find the workers they need as imbalances in labor supply and demand are less acute.

Upward pressures on pay continued to ease with the year-over-year increases for job-stayers at up 5.4 percent in December after up 5.6 percent in November and falling since September. Job-stayers' pay is up 8.0 percent year-over-year in December compared to 8.2 percent in November and declining steadily for the past year.

Forecaster see ADP's December employment number at 115,000. This would compare with November growth in private payrolls reported by the Bureau of Labor Statistics of 150,000. ADP's number for November was a rise of 103,000.

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.