WASHINGTON (MarketWatch) — Private-sector employment growth slowed down last month as employers added the fewest jobs since May, but labor conditions may still be strong enough for the Federal Reserve to start tapering its massive bond-buying program soon, economists said Thursday.
Private-sector jobs rose by 176,000 in August, with gains at small, medium and large businesses, according to data released Thursday by Automatic Data Processing Inc. That total is down from 198,000 jobs created in July.
But a trend in private employment shows steady expansion over the past few months. The three-month moving average for private job gains rose to 188,000 in August, up from 140,000 in May.
“We had hoped for a slightly stronger reading but this is good enough, if replicated in the official employment numbers tomorrow, to keep the Fed on course to announce tapering later this month,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a research note.
According to ADP’s private-jobs report for August, medium businesses added 74,000 spots, small businesses added 71,000 and large businesses added 32,000. Service providers added 165,000 jobs, while goods producers added 11,000.
August’s private-payrolls gain is “enough to reinforce expectations that the Fed will begin to taper its asset purchases, albeit cautiously, later this month,” wrote Paul Ashworth, chief U.S. economist at Capital Economics, in a research note.
Mark Zandi, chief economist of Moody’s Analytics, which prepares the report with ADP data, said there’s “little evidence” that fiscal austerity and health-care reform are having a significant impact on jobs.
“It is steady as she goes in the job market,” Zandi said.
Analysts polled by MarketWatch had expected an August gain of 185,000, compared with an originally estimated increase of 200,000 in July. Markets look to ADP’s report to provide some guidance on the U.S. Department of Labor’s jobs estimate, which will be released Friday and includes information on both private and public-sector payrolls. Economists expect the government to report Friday that nonfarm payrolls rose 170,000 in August, slightly higher than July’s gain of 162,000.
Economic data are under a microscope as analysts try to estimate when the Fed could start tapering its massive bond-buying program. Though there’s been some concern that rising mortgage rates are taking an unexpectedly large toll on the housing market’s recovery, a tapering announcement could come as early as this month if the Fed deems the economy healthy enough.
Elsewhere Thursday, a report from outplacement consultancy Challenger, Gray & Christmas showed that announced layoffs rose above 50,000 in August, hitting the highest level since February, and were up 57% from the year-earlier period. Driven by less international demand for mining equipment, cuts announced in August were led by the industrial-goods sector, which had more than 22,000 layoffs, the largest tally since January 2009.
“While that definitely has an impact on the economy, it is not as worrisome as an overall slowdown in construction or manufacturing,” said Chief Executive John Challenger in a statement.
Also Thursday, the U.S. Department of Labor reported that the number of Americans who applied for new unemployment-insurance benefits is close to a five-and-a-half year low.
Later this morning, data are expected to show that non-manufacturing activity expanded in August, but at a slightly slower pace.
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