By Howard Schneider

WASHINGTON (Reuters) – U.S. Federal Reserve Chair Jerome Powell has tied the initial wind down of the central bank’s bondbuying program to “decent” job growth in September, but high frequency payroll data so far show the pandemic may still be holding back hiring.

UKG Vice President Dave Gilbertson said that shift work in a number of industries was flat from August to September according to a UKG report. This week’s federal jobs survey showed this.

“We will likely see one more month go by without the job creation acceleration that economists have been predicting,” said Gilbertson, noting that job openings remain strong but “people remain unwilling to jump back into the market, whether that be due to family and childcare obligations, salary and benefit requirements, changing job paths, or the surging Delta variant.”

Powell said Wednesday the Fed intends to begin reducing its $120 billion in monthly bond purchases as soon as November, and, absent a significant change in the direction of the U.S. recovery, certainly by the end of the year.

He did however set conditions around the September government report that would detail job creation. It will be published on October 8.

The Fed will not receive it before the November meeting. Powell indicated that the report would be Powell’s final official job report. However, Powell noted that the report should be good enough to show the extent of September jobs creation.

Normal times, that would be one thing. The average monthly job growth for the decade between 2010-the start of the pandemic was 186,000.

This is probably a record for pandemic times, when millions more jobs are still lost.

Since December, when the Fed stated that it needed to make “substantial further improvements” in the labor markets before it began to decrease its bond purchases, the average monthly job creation is 487,000. For the United States’ to regain 50% of its “missing payroll positions” in September, the Fed would have to add 365,000 jobs. Officials have used that benchmark as a marker for “substantial” progress.

It is possible that the Fed will be disappointed.

J.P. Morgan recently analyzed alternative frequency data and predicted that 330,000 additional jobs would be created in September.

Payroll data from Homebase https://joinhomebase.com/data shows a steady decline in employment at a sample of around 50,000 small businesses, many of them restaurants and other service sector firms most likely to feel the impact if consumers shy away from in-person activities again given the new surge of coronavirus cases.

A Oxford Economics recovery tracker showed a drop of 2 points in employment measures for the week ending Sept. 10.

Powell reiterated the Fed’s recognition of a pandemic in its Wednesday policy statement.

Powell explained that the Fed has “a unique situation” in which the labor market is tight. There are record openings for jobs and rising wages. These conditions would enable the Fed to reduce monthly bond purchases and stop supporting pandemics. Policymakers, moreover, anticipated a surge of new jobs in the fall as schools reopened, unemployment benefits expired, and other changes “would come together…so we’d get out of this strange world where there are lots of unemployed people and a high unemployment rate but a labor shortage.”

Powell stated that “Delta” happened instead, which refers to the more severe coronavirus strain. Employers added 235,000 new jobs in August.

Other dud job reports have appeared in the recent months.

In December the number of job openings declined and in April, at the height of the spring vaccination rollout, 269,000 jobs were created.

As the Fed prepares for its November policy meeting and the possible beginning of the bond taper, September is becoming more important.

Powell indicated that if the economy is moving in the right direction, Powell believes we could move forward at the next meeting.