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Private sector added disappointing 166,000 new jobs in September

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WASHINGTON -- The private sector added a disappointing 166,000 net new jobs last month and significantly revised down its estimate for August in a sign that labor market growth weakened through the summer, payroll processing firm ADP said Wednesday.

The figure for last month was below analysts' projections that the closely watched report would show that businesses added 180,000 jobs in September.

September's job growth was an improvement over the previous month, but only because ADP revised its August figure down to 159,000 from the initially reported 176,000.

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"The job market appears to have softened in recent months," said Mark Zandi, chief economist at Moody’s Analytics, which assists ADP with its monthly report.

The ADP figures take on added significance this month because the partial federal government shutdown probably will delay Friday's release of the Labor Department's September jobs report.

Economists have been projecting that report would show the economy added 184,000 net new private and public sector jobs last month, up from 169,000 in August. The unemployment rate is projected to have held steady at 7.3%.

The weaker ADP numbers could affect those projections.

Chris Rupkey, chief financial economist at the Bank of Tokyo-Mitsubishi in New York, called ADP's September figure a "middle of the road" number. But ADP has not always been a great predictor of overall job growth, he said.

"This kind of leaves us high and dry on what the economy is doing," Rupkey said of the delayed government jobs report.

ADP showed that financial services firms cut 4,000 jobs last month. Zandi said that reflected a decline in mortgage refinancing as interest rates have risen since the spring in anticipation that the Federal Reserve would start reducing a key stimulus program.

The manufacturing sector remained soft, he said, adding just 1,000 jobs in September. Construction hiring was a bright spot, with companies adding 16,000 net new jobs in that sector last month, Zandi said.

The government shutdown and a potential federal default if the debt limit is not raised loom as problems for the economy, he said.

The shutdown probably won't have a significant effect unless it extends into next week, when it could start to unnerve investors, Zandi said.

"If we get into next week and there’s no agrement and it doesn’t look like one is imminent, my sense is we’ll start to see a sell-off, he said.

The economic damage would be small if the sell-off only lasts for a few days.

But if Washington politicians can't agree to raise the $16.7-trillion debt limit by the Treasury Department's Oct. 17 deadline, the government would face a first-ever default that would trigger severe economic harm and push the nation back into recession, Zandi said.

"If they can’t get it together by Oct. 17 and we hit the debt limt, then policymakers will have opened an economic Pandora's Box," he said. "It would be just a mess and it would be very difficult to staunch the unraveling economy at that point."

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