For the better part of the past two years, we watched this report for "cracks in the labor market" which was the explicit condition named by the Fed — it would force the Fed's hand.

Weak jobs meant rate cuts.

So, markets were on high alert the first Friday of every month.

That era/regime is largely behind us.

The shift came back in December. Remember, the jobs report due that month was postponed by a government shutdown. When it was finally reported mid-month, it showed the unemployment rate jumping to 4.6%.

It was the highest level in four years, and yet the market barely flinched.

Why?  The Fed had already pivoted.

The Fed cut rates for a third consecutive time earlier that month, and had turned the liquidity spigot back on (returned to expanding the balance sheet).

The conditionality of the jobs report was supplanted by signs of financial instability (some stress in the money markets) and cooling inflation.

That brings us to tomorrow's report. 

First, rates. The story now isn't whether a soft print triggers a rate cut. In fact, at the moment, the market is pricing in the chance of a rate hike by year-end. 

But what matters now, under a Warsh-led Fed, is getting the Fed out of the way of an economy that has pro-growth policy behind it and a technology revolution running through it. It's a structural tailwind.

Second, the jobs number itself is communicating a different message. Under the Trump administration, government headcount is being cut while private hiring is coming back (chart below). 

So, for the headline payroll number, a "soft" headline could actually be a healthy rotation: fewer government jobs, more productive private ones. The composition matters maybe more than the total.

The old question was "will this scare the Fed into cutting?" The better question now, and in the coming months: "is the private economy growing, and is AI-driven productive work showing up in companies, that leads to more hiring, to drive more productive work …?"