(Reuters) – U.S. employment increased far less than expected in September amid a decline in government payrolls, but hiring could pick up in the months ahead as COVID-19 infections subside and people resume the search for work.

FILE PHOTO: A woman enters a store next to a sign advertising job openings at Times Square in New York City, New York, U.S., August 6, 2021. REUTERS/Eduardo Munoz/File Photo/File Photo

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MARKET REACTION:

STOCKS: S&P e-mini futures initially dipped, but then recovered and were last up 0.2%.

BONDS: The yield on the benchmark 10-year note dipped and was last around 1.57%

FOREX: The dollar index fell and was last down 0.18%

COMMENTS:

RICK MECKLER, PARTNER, CHERRY LANE INVESTMENTS, NEW VERNON, NEW JERSEY

“I think we’re in a strange place in terms of the market today. We have investor concern about rates rising too quickly. And we have investor concern about the economy being too weak. You know probably only one of those things is true.

“It has been true now for the last few years, that individual numbers, unless they’re extreme outliers, have no true effect on short term policy. I think the Fed has decided that the best course for keeping markets stable, is a very well telegraphed and consistent policy.

“I guess I’m optimistic about future growth. But I don’t think I’m surprised and I doubt the Fed is surprised that current conditions remain somewhat muted and less robust than you would expect at this point in the, in the recovery from the low of the pandemic.”

SCOTT ANDERSON, CHIEF ECONOMIST, BANK OF THE WEST, SAN FRANCISCO:

“I think it just barely clears Powell’s hurdle of “decent”. I still think a November taper announcement is still the most likely path for the Fed.

“The FOMC taper timing should not swing on only one economic data point. The Fed will take into consideration a broad cross-section of data, including inflation, wage growth, and labor shortage issues.”

SCOTT BROWN, CHIEF ECONOMIST, RAYMOND JAMES, ST. PETERSBURG, FLORIDA

“Base value is disappointing relative to expectations, but it is kind of a mixed bag. We had softer gains in education so that showed up as a seasonally adjusted decline… there is a lot of noise because it’s the start of the school year and that would create some volatility in the numbers.

“All in all it is still consistent with continued job growth overall. The Fed has cited sustained improvement in labor market for tapering. This adds to the cumulative evidence. It may not be as strong as we hoped but it is still showing signs of improvement.

“The markets really have a hard time looking beyond the headline number, but this is seasonally adjusted issue with education. It may still be a little disappointing, but it is only month.”

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

“These numbers are disappointing. The falling (labor market) participation rate explains why the unemployment rate dropped. But the bottom line is this is weak data.

“This is a disappointing number and it’s being accompanied by higher wage costs and that’s pointing to higher wage inflation down the road. It’s not likely to derail the Fed’s tapering.”

(Regarding the drop in government payrolls): “Maybe it’s because the government has mandated vaccines, it’s possible that a lot of government workers left because of that, but that’s a long shot.”

“The Delta variant is a wild card and it’s proven to be a hidden factor in the employment data. We still have a lot of people missing from the workforce, even though schools are open, and parents are returning to work. But it might be preventing some people from returning to the workforce.”

SHAWN CRUZ, SENIOR MARKET STRATEGIST AT TD AMERITRADE IN JERSEY CITY, NEW JERSEY

“It looks like the bulk of that hit actually came out of the government sector, government lost 123,000 and the bulk of that was actually in local government in education. Outside of government if you just look at education and health services, education services also had a drop with nursing, residential care facilities as well. It was interesting to see where some of these drops were actually coming from but if you are looking at some of the other areas, construction had a slight gain but hasn’t really moved too much either and the leisure and hospitality sector had a little bit of an increase but I don’t think anything to write home about. So this is pretty much a fairly soft report across the board.”

“I don’t know that this really puts the Fed in a very good spot for having a clear-cut way to go out there and start tightening policy, at least the way this report is looking. The one caveat that could come with this report is the survey week is early September and that is where we were still having some pretty major concerns with the Delta variant.”

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