WASHINGTON (MarketWatch) — Private-sector employment growth slowed last month as employers added the fewest jobs since May, but labor conditions may still be strong enough for the Federal Reserve to start tapering its massive bond-buying program soon, economists said Thursday.

Private-sector jobs rose by 176,000 in August, with gains at small, midsize and large businesses, according to data released Thursday by Automatic Data Processing Inc. That total is down from the 198,000 jobs created in July.

But a trend in private employment shows steady expansion over the past few months. The three-month moving average for private-sector job gains rose to 188,000 in August from 140,000 in May.

“We had hoped for a slightly stronger reading but this is good enough, if replicated in the official employment numbers tomorrow, to keep the Fed on course to announce tapering later this month,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a research note.

According to ADP’s private-jobs report for August, medium-size businesses added 74,000 spots, small businesses added 71,000 and large businesses 32,000. Service providers added 165,000 jobs, while goods producers added 11,000.

August’s private-sector payrolls gain is “enough to reinforce expectations that the Fed will begin to taper its asset purchases, albeit cautiously, later this month,” wrote Paul Ashworth, chief U.S. economist at Capital Economics, in a research note.

Mark Zandi, chief economist of Moody’s Analytics, which prepares the report with ADP data, said there’s “little evidence” that fiscal austerity and health-care reform are having a significant impact on jobs. “It is steady as she goes in the job market,” Zandi said.

Analysts polled by MarketWatch had expected an August gain of 185,000 jobs, compared with an originally estimated increase of 200,000 in July. Markets look to ADP’s report to provide some guidance on the U.S. Department of Labor’s jobs estimate, which will be released Friday and includes information on both private- and public-sector payrolls. Economists expect the government to report Friday that nonfarm payrolls rose 170,000 in August, slightly higher than July’s gain of 162,000.

Job seekers at a job fair in El Segundo, Calif., in June. Bloomberg

Economic data under a microscope

Economic data are under an intensified microscope as analysts try to estimate when the Fed could start contracting its bond purchases. Though there’s been some concern that rising mortgage rates are taking an unexpectedly large toll on the housing market’s recovery, a tapering announcement could come as early as this month if the Fed deems the economy healthy enough.

Other employment data released Thursday point to a strengthening jobs environment. The U.S. Department of Labor reported that the number of Americans who applied for new unemployment-insurance benefits is close to a 5 1/2-year low. Elsewhere, a report on the services sector showed that a gauge of hiring intentions grew faster in August. Indeed, the Institute for Supply Management’s report on nonmanufacturing firms showed that hiring intentions hit their highest rate since February.

The implications of the ISM nonmanufacturing report, combined with the week’s other economic data, on the margin, “reinforce the case for the Fed to start tapering this month,” wrote Martin Schwerdtfeger, senior economist at TD Economics, in a research note. He went on to call Friday’s payrolls report the “final piece of the puzzle” but noted that Treasurys were selling off.

However, a report from outplacement consultancy Challenger, Gray & Christmas showed that announced layoffs topped 50,000 in August to hit their highest level since February and were up 57% from the year-earlier period. Driven by less international demand for mining equipment, cuts announced in August were led by the industrial-goods sector, which saw more than 22,000 layoffs, the largest tally since January 2009.

“While that definitely has an impact on the economy,” said Challenger, Gray & Christmas’s John Challenger, in a statement, “it is not as worrisome as an overall slowdown in construction or manufacturing.”