| NEW YORK
NEW YORK U.S. private employers added fewer jobs than expected in September and mortgage applications remained near flat in the latest week, underscoring expectations that growth in the world's biggest economy will stay steady but sluggish.
U.S. private employers added 166,000 jobs last month, according to payroll processor ADP's National Employment Report. Economists in a Reuters poll had expected a gain of 180,000 jobs. August's private payrolls gains were revised to 159,000 from the previously reported 176,000.
But while the current numbers don't yet include any effects from the federal government shutdown that began this week, economists fretted upcoming figures could take a hit from the impasse in Congress.
With House Republicans standing firm on their demand to delay President Barack Obama's signature healthcare law in exchange for agreeing to keep the government running, estimates for the shutdown length run the gamut from a few days to weeks.
One result of the shutdown is added weight for the ADP report, as some other economic data for August and September has been or may be delayed. For example, it now seems unlikely Friday's key non-farm payrolls report from the Labor Department will be released according to schedule.
The weak ADP report suggests the U.S. Federal Reserve will need to keep its support for the world's biggest economy in place to bolster growth which the International Monetary Fund forecasts this year at a lackluster 1.7 percent.
The ADP report "basically says that the stimulus will continue," said Chris Gaffney, senior market strategist at EverBank Wealth Management in St. Louis, Missouri.
"The government shutdown will be a negative impact on the U.S. economy, extending the need for additional stimulus."
In a further sign of weakness, industry data showed applications for U.S. home loans dipped slightly in the latest week, as a drop in demand for purchase loans outweighed an increase in refinancing demand.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 0.4 percent in the week ended September 27.
The Fed has been weighing pulling back on its $85-billion-per-month bond buying program but has so far kept up the purchase pace on worries that the economy, including the labor and housing markets, has not yet gathered enough momentum to stand on its own.
Nevertheless, the government shutdown will not show up in ADP data "to any significant degree" unless the shutdown lasts through the middle of October, Mark Zandi, chief economist of Moody's Analytics, said in a conference call with reporters. The ADP report is jointly developed with Moody's Analytics.
But Zandi noted that political uncertainty, including the kind of brinkmanship involved in the federal government shutdown, has had a "significant effect" on the U.S. economy in recent years, raising the unemployment rate by perhaps as much as 0.7 percentage point.
And he emphasized the potential for far worse effects should the impasse in Congress extend to the need to raise the government borrowing limit. That, he said, would open a Pandora's box of problems for the economy.
Notable in Wednesday's report were small employers, who added 74,000 jobs, more than either medium or large businesses.
Zandi also said he was not seeing evidence that small employers are shying away from hiring because of the health care provisions of the Affordable Care Act.
(Reporting by Luciana Lopez; Additional reporting by Nick Olivari; Editing by Chizu Nomiyama and Krista Hughes)