Jobs Report Today: Markets on Rate-Hike Watch After the ADP Miss

At 8:30 a.m. ET today, the July jobs report lands — and for once, the market may be rooting for mediocre news.

The setup: ADP estimated that private employers added 44,000 jobs in July, below the 75,000 economists expected and down from 95,000 in June. In normal times, weaker hiring would read as bad news. In this market, it can also read as relief, because a cooling labor market argues against the September rate hike that three Fed dissenters wanted.

That is the strange logic of a good-news-is-bad-news market: economic strength can raise the expected path of interest rates, while moderate weakness can lower it.

How to read the report in 60 seconds

The jobs report is three numbers wearing one name, and they do not always agree.

Payrolls — the jobs number. Forecasters expect roughly 100,000 jobs after June's 57,000 gain. A result well above expectations could revive the argument that the economy can absorb higher rates. A result far below expectations could lower hike odds but also raise concern that hiring is deteriorating too quickly.

The unemployment rate. Economists expect it to hold near 4.2%, though it could rise even if payrolls grow because payrolls and unemployment come from different surveys. The household survey also captures changes in the size of the labor force, which can move the rate independently of the headline jobs number.

Wage growth — the sleeper that may matter most. Average hourly earnings are the inflation signal inside the jobs report. Firm hiring plus fast wage growth would strengthen the case for a September hike. Softer pay growth could buy the Fed more patience even if payrolls beat expectations.

The market's simplified reaction function is: moderate hiring plus softer wages may bring relief; strong hiring plus hot wages puts the September debate back in focus. A mixed report can produce a volatile first reaction as traders work out which signal matters most.