ADP Reports May Private Payrolls Growth Slows to 152,000, Below Expectations

James Hyerczyk
Updated: Jun 5, 2024, 14:19 GMT+00:00

Key Points:

  • Private companies add 152,000 jobs in May, missing the 175,000 expectation, highlighting a cooling labor market.
  • Services sector contributes the bulk of new jobs in May, with notable losses in manufacturing and small businesses.
  • Manufacturing loses 20,000 jobs, small businesses with 20-49 workers decline by 36,000, signaling economic weaknesses.
ADP Employment

Private Payrolls Growth Slows to 152,000 in May, Much Less Than Expected

Private job creation in the U.S. slowed significantly in May, according to the latest report from ADP. This deceleration is indicative of a cooling labor market.

ADP Report Highlights Lower Job Growth

ADP reported that private companies added 152,000 jobs in May, falling short of the Dow Jones consensus estimate of 175,000 and the downwardly revised 188,000 jobs in April. This marks the lowest monthly job growth since February.

Services Sector Leads Hiring

The majority of job gains came from the services sector, contributing a substantial portion of the total new jobs:

  • Trade, Transportation, and Utilities: +55,000 jobs
  • Education and Health Services: +46,000 jobs
  • Construction: +32,000 jobs

In contrast, the goods-producing sector contributed only 3,000 new jobs.

Notable Job Losses in Key Sectors

Several sectors experienced job losses in May, underscoring weaknesses in specific areas of the economy:

  • Manufacturing: -20,000 jobs
  • Natural Resources and Mining: -9,000 jobs
  • Information: -7,000 jobs
  • Professional and Business Services: -6,000 jobs

Additionally, small businesses with 20 to 49 employees saw a decline of 36,000 jobs.

Slower Wage Growth

Annual pay growth remained steady at a 5% rate for the third consecutive month, reflecting a deceleration in wage gains alongside job creation. ADP’s chief economist, Nela Richardson, noted the labor market’s overall solidity but highlighted notable pockets of weakness impacting both producers and consumers.

Implications for Upcoming BLS Report

The ADP report precedes the Bureau of Labor Statistics’ (BLS) nonfarm payrolls count, which is highly anticipated by Wall Street economists. The BLS is expected to report a growth of 190,000 nonfarm payrolls in May, up from 175,000 in April. However, recent indicators, including a decline in job openings to just over 8 million in April—the lowest since February 2021—suggest a broader slowdown in hiring.

Market Forecast: Bearish Outlook

Given the slowdown in job creation and persistent weaknesses in several sectors, the labor market shows signs of softening. This trend, coupled with steady but modest wage growth, suggests a bearish outlook for the short-term labor market. Traders should monitor upcoming employment data closely for further insights into labor market conditions.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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