INDICATOR: August ADP Job Forecast/Challenger, Gray and Christmas Layoffs

KEY DATA: ADP: 201,000 /Layoffs: 32,239 (Down 12.5 percent)

IN A NUTSHELL: “The labor market is getting better, and while the pace of improvement is nothing great, the direction is clear.”

WHAT IT MEANS: We may not be seeing a deluge of new jobs, but it clearly looks like firms are hiring again.

The official jobs report comes out tomorrow and that means ADP provides its insight into private-sector activity. The payroll servicing firm numbers indicate we could see a rise that is the largest in five months. That was late winter/early spring when job growth was in the 200,000 per month range. So, that is good news for the economy, if it turns out to be correct.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama For Mishandling Economy. See What They Did.

The increases were broadly based, with all sizes of companies adding workers. Finally, the largest firms are starting to pull their weight, though the fastest increases are still coming from small to mid-sized firms.

The one concern was a somewhat minimal rise in manufacturing payrolls. This sector is showing signs of wear and tear and thus we may need another area to come to the forefront. Right now it is not clear which sector that will be.

In a complementary report, Challenger, Gray and Christmas indicated that layoff notices fell sharply in August to the lowest level since December 2010.

What is interesting and hopeful was the data on summer job cuts. For the June-August period, the monthly average was the smallest in the past 10 years. That may be an indicator that firms have essentially “right-sized” their workforces in light of the uncertainties they are facing.

That bodes well for job growth, which is just the difference between hires and layoffs.

MARKETS AND FED POLICY IMPLICATIONS: It is all about jobs, at least as far as politicians are concerned. But jobs are the symptom not the illness of this slow recovery.

The purpose of executives is to create income and wealth, and only by doing that will jobs follow.

Thus, when we see an increase in job creation and a decrease in layoffs, we can infer that the underlying problems facing the economy are easing. That seems to be the case, though there are so many uncertainties out there that it is unlikely job growth will soar.

Still, investors should like this report, but tomorrow’s numbers are what really matter so they will likely take a wait-and-see approach.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama For Mishandling Economy. See What They Did.