• INDICATOR: October ADP Jobs Estimate, Supply Managers’ Non-Manufacturing Survey, Help Wanted Online and September Trade Deficit
• KEY DATA: ADP: 182,000; ISM (Non-Man.): +2.2 points; Help Wanted: +172,300; Trade Deficit: down $7.2 billion
• IN A NUTSHELL:  “With Fed Chair Yellen talking up the possibility of a December rate hike, today’s decent numbers raise the possibility that the Fed may actually move next month.”

WHAT IT MEANS:  While there were lots of numbers released today, the key information came from Fed Chair Yellen, who reiterated at a Congressional hearing today that a December rate hike was a “live possibility.”

She said, again, that the data would drive the decision and today’s numbers didn’t disappoint.  With the big dog waiting to bark, the ADP estimate of private sector payroll gains points to a decent increase on Friday. ADP’s numbers indicate that small and medium sized businesses added workers at a solid pace but large firms continue to disappoint.  The manufacturing sector looks like it will continue to hold things back, while services and construction hiring was strong.

Adding to the belief that Friday’s jobs report could be quite decent is the Institute for Supply Management’s October Non-Manufacturing survey results.  Activity improved solidly, powered by a strong uptick in new orders, including exports, as well as continued increases in backlogs.  This helped accelerate hiring activity. 

Also, The Conference Board’s Help Wanted Online measure jumped in October, indicating that firms were out looking for a lot more workers – and hopefully actually finding some! 

Finally, the trade deficit narrowed sharply in September. Imports of most goods fell, led by a sharp reduction in oil purchases.  But demand for foreign vehicles, aircraft, cell phones and a variety of other goods was also off.  We did buy more foreign computers and drugs.  As for exports, they rose, with just about every major category posting a gain.

MARKETS AND FED POLICY IMPLICATIONS: Friday’s employment report cannot come soon enough.  I am guessing that payrolls rose by something in the range of 210,000 and the unemployment rate edged down to 5.0%. 

The job numbers for the past couple of months look a little light for the condition of the economy, which is still solid, and that could point to a surprise on the upside.  

Keep in mind, anything over 150,000 new jobs should be enough to cause the unemployment rate to fall, and that looks likely.  If we get a number close to or above 200,000, investors better start taking Chair Yellen’s warning very seriously. 

Also, watch for the wage number.  If that accelerates as well, which I also think is likely, then rate hike fever could become very serious.  But that’s for Friday. 

Today, investors will likely start pricing in the possibility of a December rate hike and I don’t think they will like that. 

And that drives me crazy, as the Fed will only increase rates if it thinks the economy is strong enough to absorb the increases. 

With earnings nothing special, shouldn’t investors want to see a stronger economy, even if it means higher interest rates?