Slow Job Growth Suggests Fed Was Right to Delay Taper

Photograph by Patrick T. Fallon/Bloomberg

The private sector added 166,000 jobs in September,  fewer than most economists predicted, according to the ADP Research Institute’s monthly tally. ADP also revised August’s jobs number down to 159,000 from 176,000.

The September number’s not bad—it’s right in line with the 2013 monthly average of 167,000. But it’s certainly not evidence of a labor market that’s picking up steam. This was the first jobs data released since the Federal Reserve announced on Sept. 18 that it would not pull back on its pace of bond buying. Since the U.S. Bureau of Labor Statistics won’t be able to produce its monthly non-farm payroll report on Friday, thanks to the government shutdown, this is all the jobs data we’ll get this week.

That’s not to say we can’t guess what the BLS number might be. So far this year, the ADP number has been undershooting the BLS number by about 17,000 jobs per month, according to a note put out this morning by Neil Dutta, U.S. economist at Renaissance Macro Research. That implies a BLS number around 183,000 for September. Again, not bad, but not quite the growth that Fed Chairman Ben Bernanke is seeking to ease back on the Fed’s $85 billion monthly bond buying program.

“The ADP report suggests the Fed was right to delay the tapering of its monthly asset purchases last month,” Paul Ashworth, chief U.S. economist at Capital Economics, wrote in a note this morning.

The total jobs picture for 2013 is starting to come into view. A tally of the ADP’s reports for the first nine months of the year suggests that the private sector is on pace to create about 1.956 million jobs in 2013. Which, as Dutta points out this morning, is exactly the number of private sector jobs created in 2012.

That’s not bad, considering all the headwinds that have been put into place this year: sequester cuts in government spending, large reductions in the deficit, and tax increases. Still, it’s not the kind of job growth the Fed wants to see before easing back on the monetary gas pedal, especially with a debt-ceiling crisis looming and the government shut down for the foreseeable future.

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