KEY DATA: ADP: +177,000; HWOL: +1,900; Pending Home Sales: +1.3%

IN A NUTSHELL: “It looks like businesses are still adding lots of workers and with want ads high and home sales improving, all signs point to an accelerating economy.”

WHAT IT MEANS: If Friday is the government’s employment report, then Wednesday is when ADP provides some insight into what the private sector was doing on the hiring front. Right now, it looks like firms continued to expand their workforces at a solid pace in August. The employment services company ADP indicated that firms of all sizes hired. Interestingly, large companies are now in the market. They had been the weakest link in the labor market. Looking across industries, manufacturers remain cautious and construction firms seemed to contract. However, the service-producing sector is hiring very solidly.

Will hiring remain decent? It looks that way. The Conference Board’s Help Wanted OnLine measure was up minimally August after a solid rise in July. Ads, which had been declining for a few months, seem to have stabilized. Most likely, with so many positions going begging, companies are getting realistic about what can be filled and are advertising accordingly. Thus, the decline in ads we had seen didn’t signal any major drop in hiring and the current level implies that firms are still looking for lots of new workers.

Most of the recent housing data have been pretty solid and the National Association or Realtors’ July reading on future sales adds to the picture of an improving housing market. Pending home sales increased somewhat modestly in July and didn’t reach the high reached in April. But the level is solid and points to a continuation in the saw-tooth rise in existing home sales. Yes, demand did decline in July, but it should be up in August. Given that there is such a dearth of supply, that is good news.

MARKETS AND FED POLICY IMPLICATIONS: Fed members keep trying to tell us that “everything meeting is a live meeting”, so is a rate hike at the September 20-21 meeting really a possibility? It would take an awful lot of things to go not only right but better than right for that to happen, starting with Friday’s jobs number. My forecast is for roughly 170,000 new positions and an unemployment rate of 4.8%, down from 4.9%. Given that there were nearly 550,000 new positions added in June and July, the risk is that the payroll increase is lower than that I expect. Thus, if we see something north or 200,000, it would be huge. And if wage gains are up by 0.3% or preferably more, then we can start, and I underline start, to ask the question about a rate hike. Given the Fed members’ statements that one number doesn’t determine policy, an increase should require a lot more data than just strong employment numbers that say the economy is accelerating sharply, to support a move. Unfortunately, not a whole lot of August numbers – and obviously none for September – will be released before the next FOMC meeting. So yes, when it comes to the Fed, anything is possible, but right now, it is hard to see that it will do anything. I think they should. I think the economy is strong enough and has been strong enough the entire year to absorb another rate hike. However, after arguing for action for so long, I have decided to move to Missouri and say, “show me”. As for investors, with the jobs report looming and the potential for a surprise being great, they take strong stands at their own peril.