At Extreme Investor Network, we pride ourselves on providing unique and valuable insights into the economy that you won’t find anywhere else. Today, we’re breaking down the latest report from ADP that shows private job creation slowed more than expected in May, signaling further sluggishness in the labor market.
According to ADP, companies added 152,000 jobs in May, fewer than the downwardly revised 188,000 in April and below the Dow Jones consensus estimate for 175,000. This marks the lowest monthly level since January. Along with the slowdown in job creation, annual pay growth gains held at a 5% rate, where they have been for three months running.
“Job gains and pay growth are slowing going into the second half of the year,” said Nela Richardson, ADP’s chief economist. “The labor market is solid, but we’re monitoring notable pockets of weakness tied to both producers and consumers.”
Nearly all of the hiring came from the services sector, with goods producers contributing just 3,000 jobs to the total. Trade, transportation, and utilities led with 55,000 new jobs, while education and health services added 46,000, and construction contributed 32,000. However, leisure and hospitality, a leading contributor in recent years, saw a gain of just 12,000 jobs.
On the flip side, several sectors saw job losses in May. Manufacturing lost 20,000 jobs, while natural resources and mining, information, and professional and business services also saw decreases. Small businesses employing between 20 and 49 workers were down 36,000 jobs.
The report from ADP comes just two days ahead of the more closely watched nonfarm payrolls count from the Bureau of Labor Statistics. While ADP can sometimes provide a preview of what’s to come in the BLS report, the two counts can differ, sometimes drastically.
Looking ahead, Wall Street economists expect nonfarm payrolls to have expanded by 190,000 in May after growing by 175,000 the previous month. However, recent indicators have shown signs of a slowdown in hiring, with job openings falling to just over 8 million in April, the lowest level since February 2021.
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