Hiring decelerated to the slowest pace in two years as sectors including business services and education, and health shed jobs, pointing to a weakened demand for workers.
Private-sector payrolls increased by 37,000 last month, according to ADP Research, lower than all estimates in a Bloomberg survey of economists. That marked the second month in a row when the figures were well below expectations.
“After a strong start to the year, hiring is losing momentum,” Nela Richardson, chief economist at ADP, said Wednesday in a statement.
The figures suggest the past two months of high anxiety around President Donald Trump’s ever-changing economic policies weighed on business staffing decisions. Hiring has slowed, and it is taking longer for people who are out of work to find a new job. Economists anticipate the labor market will show more signs of cooling in the coming months.
Trade and transportation, and manufacturing also lost jobs in May, the data show. However, leisure and hospitality, as well as financial activities, increased hiring.
Stock futures pared gains, and Treasury yields declined.
On social media, Trump reiterated that Federal Reserve Chair Jerome Powell should lower interest rates, following the ADP report.
A majority of consumers in a University of Michigan survey continue to anticipate that business conditions will worsen over the next year and unemployment will rise. Fed officials are waiting to see further data on the impact of trade policies before adjusting interest rates, but have acknowledged that tariffs could lead to higher inflation and slower growth.
The ADP report, published in collaboration with the Stanford Digital Economy Lab, showed wage growth was little changed. Workers who changed jobs saw a 7% increase in pay, while those who stayed put saw a 4.5% gain. ADP bases its findings on payrolls covering more than 25 million US private-sector employees.
The government’s May employment report, due Friday, is expected to show that growth in nonfarm payrolls slowed from a solid April hiring pace, and the unemployment rate remained steady.
With ADP’s payroll data indicating a sharp slowdown in April and May and BLS and LinkedIn data indicating steadiness, labor market data is now sending mixed messages on the impact of the sharp rise in uncertainty this year. It’s the summer of 2022 all over again with a labor market in transition. This development makes this week’s jobs report another pivot data point for close observers (equity markets, central banks). For job seekers and new grads, this week’s report will not make much difference to their fortunes as hiring remains slow across many sectors and unemployment has risen for younger workers. For more on what to expect in Friday’s report and why, check out a preview of this week's jobs report. Here are some key highlights:
1. Consensus estimates project nonfarm payroll employment to have increased by around 125K in May, moderating substantially from last month’s gain. LinkedIn data again suggests some upside to job gains compared to the consensus, with an increase of around 165K due to an uptick in hiring from April to May.
2. Unemployment is expected to remain at 4.2%. Future increases in the unemployment rate are likely to come from layoffs, with no acceleration in hiring in sight and a stall in labor force participation growth.
3. Despite concerns around the impact of trade policy and uncertainty, the strength of labor market expansion still depends primarily on the performance of Healthcare and Social Assistance, Government, and Leisure and Hospitality.
1. Consensus estimates project nonfarm payroll employment to have increased by around 125K in May, moderating substantially from last month’s gain. LinkedIn data again suggests some upside to job gains compared to the consensus, with an increase of around 165K due to an uptick in hiring from April to May.
2. Unemployment is expected to remain at 4.2%. Future increases in the unemployment rate are likely to come from layoffs, with no acceleration in hiring in sight and a stall in labor force participation growth.
3. Despite concerns around the impact of trade policy and uncertainty, the strength of labor market expansion still depends primarily on the performance of Healthcare and Social Assistance, Government, and Leisure and Hospitality.