The ADP national employment report shows private sector payrolls up 122,000 in July after a small upward revision to up 155,000 in June. The increase in July is below the consensus of 154,000 in the Econoday survey of forecasters. The lower-than-expected increase is nonetheless consistent with broad gains in hiring in a modestly expanding economy.

Fed policymakers will have these numbers to take into consideration before the conclusion of the FOMC meeting of July 30-31. These are unlikely to do more than confirm their assessment of current labor market conditions as moving in line with their quarterly forecast. It should help solidify that the FOMC can wait to cut rates at the present meeting, but have enough progress on inflation and softening in the labor market to cut at the September 17-19 meeting.

Jobs are up 37,000 in July among goods-producers with a solid increase of 39,000 in construction and small gain of 2,000 in natural resources/mining, while manufacturing is down 4,000. Service-providers' payrolls in July are up 85,000, mainly from a 61,000 rise in trade/transportation/utilities, followed by gains of 24,000 in leisure/hospitality, 22,000 in education/health services, 19,000 in in"other" services, and 14,000 in financial activities. There was some offset from decreases of 37,000 in professional/business services and 18,000 in information.

Hiring at small establishments (1-49 workers) is down 7,000 in July, while medium sized firms (50-499) are up 70,000 and large firms (500+) are up 62,000.

Smaller businesses may once again be at a disadvantage in attracting and retaining workers with the right skills and/or experience. The median annual increase in pay for job-stayers is up 4.8 percent in July, the slowest pace in about three years. Job-changers' pay is up 7.2 percent, softest since the spring of 2021.

Forecasters see ADP's July employment number at 154,000. This would compare with June growth in private payrolls reported by the Bureau of Labor Statistics of 136,000. ADP's number for June was 150,000.

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.