Private job creation in May slowed more than anticipated, signaling further sluggishness in the labor market, according to a report from ADP. The payroll processing firm reported that companies added 152,000 jobs in May, down from the downwardly revised 188,000 in April and below the consensus estimate of 175,000. This marks the lowest monthly level since January.
In addition to the slowdown in job creation, annual pay growth gains held steady at a 5% rate, maintaining this level for three consecutive months. Nela Richardson, ADP’s chief economist, noted, “Job gains and pay growth are slowing going into the second half of the year. The labor market is solid, but we’re monitoring notable pockets of weakness tied to both producers and consumers.”
Most of the hiring came from the services sector, with goods producers contributing just a net 3,000 jobs to the total. Leading the gains were trade, transportation, and utilities with 55,000 new jobs, followed by education and health services adding 46,000, and construction contributing 32,000. The other services category added 21,000 jobs, but leisure and hospitality, a significant contributor in recent years, saw a gain of just 12,000.
Several sectors experienced job losses in May. Manufacturing, which has been in contraction for most of the past 18 months, lost 20,000 jobs. Other sectors with declines included natural resources and mining (-9,000), information (-7,000), and professional and business services (-6,000). Small businesses also faced a decline, with companies employing between 20 and 49 workers losing 36,000 jobs.
The ADP report comes two days ahead of the Bureau of Labor Statistics’ (BLS) nonfarm payrolls count, a more closely watched measure. While ADP’s data can sometimes preview the BLS report, the two counts can differ significantly. For instance, ADP reported private payroll growth of 188,000 in April, overshooting the BLS count of 167,000.
Wall Street economists expect nonfarm payrolls to have increased by 190,000 in May after a 175,000 rise in April. However, several indicators have recently shown signs of a slowdown in hiring. A BLS report released on Tuesday revealed that job openings fell to just over 8 million in April, the lowest level since February 2021.
As the labor market shows signs of slowing, the upcoming BLS report will be closely scrutinized to gauge the overall health and direction of job growth in the coming months.
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