“Reasonably good” jobs in September begin the Fed’s slowdown. Does another misfire happen?

WASHINGTON, Sept. 23 (Reuters) – US Federal Reserve Chairman Jerome Powell has linked the initial slowdown in the central bank’s bond buying program to “decent” job growth in September, but High-frequency payroll data so far shows that the pandemic could still dampen hiring.

Among them, a report released this week by payroll management company UKG showed that shiftwork in a variety of industries, measured during the week a federal employment survey is being conducted, “was indeed stable month-to-month “from August to September,” the UKG vice president said. Dave Gilbertson.

“We’ll probably see another month without the acceleration in job creation that economists are predicting,” Gilbertson said, noting that job postings remain strong but “people still don’t want to come back to the market, whether it’s for family reasons and childcare obligations, salary and benefit requirements, career development or the burgeoning variant of Delta. ”

Powell said on Wednesday that the Fed intends to start cutting its $ 120 billion monthly bond purchases as early as November and, in the absence of a significant change in the direction of the U.S. recovery, certainly d ‘by the end of the year.

Still, he laid down a condition around the government’s report, to be released on October 8, which will detail job creation in September.

This will be the last official jobs report the Fed receives before its November meeting, and while Powell has said it should not be “a knockout, awesome, super strong report,” it should be “reasonably good.” .

Normally that would mean one thing. During the decade of 2010 at the start of the pandemic, monthly employment growth averaged 186,000.

For the era of the pandemic, with millions of jobs still missing, that probably sets the bar in the hundreds of thousands.

Average monthly job creation has averaged 487,000 since the Fed said in December it would need “further substantial progress” in the labor market before it starts cutting its bond purchases . It would take about 365,000 new jobs in September in the United States to regain half of the “missing” positions when the Fed adopted the language, a reference some officials have cited as a marker of “substantial” progress.

The Fed might be disappointed.

A recent JP Morgan analysis of higher frequency alternative businesses predicts the creation of 330,000 jobs in September.

Homebase payroll data shows a steady decline in employment in a sample of around 50,000 small businesses, many of which are restaurants and other service businesses most likely to feel the impact if Consumers are once again turning away from in-person activities given the new wave of coronavirus cases.

An Oxford Economics recovery indicator fell for the week of September 10, dragged down by a 2 percentage point drop in its employment measures.

The Fed acknowledged yet another pandemic hit in the most besieged sectors of the economy in the policy statement released Wednesday, and Powell amplified the message at his press conference.

“We have (…) a unique situation where, in many ways, the job market is tight,” with record job openings, wage increases and other conditions that would allow the Fed to start to turn away from support for the pandemic and start cutting back on monthly bond purchases, Powell says. Additionally, policymakers predicted a surge of new jobs in the fall with schools reopening, unemployment benefits expiring, and other changes expiring … high unemployment but a shortage of labor. of work.

Instead, “Delta has happened,” Powell said, referring to the more virulent strain of the coronavirus, and employers added a disappointing 235,000 jobs in August.

There have been other failed job reports in recent months.

Jobs actually fell in December, and at the height of the spring vaccine rollout, the number of jobs created in April was a disappointing 269,000.

But September has now taken on increased significance as the Fed prepares for its November policy meeting and a possible start of bond reduction.

“If the economy continues to grow overall as expected, then I think (…) we could easily move forward at the next meeting,” said Powell, “or not.”

Reporting by Howard Schneider; Editing by Andrea Ricci

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