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Private businesses added 128,000 jobs in May, less than half of what estimates predicted

Private sector employment rose by 128,000 last month, which fell far below the 299,000 Dow Jones estimate.

The drop marks the worst month since the massive layoffs in April 2020, when companies sent home more than 19 million workers as the pandemic triggered a massive economic shutdown.

Small business took the biggest hit during the month, as companies employing fewer than 50 workers reduced payrolls by 91,000. Of that decline, 78,000 layoffs came from businesses with fewer than 20 employees.

“Under a backdrop of a tight labor market and elevated inflation, monthly job gains are closer to pre-pandemic levels,” ADP’s chief economist, Nela Richardson, said. “The job growth rate of hiring has tempered across all industries, while small businesses remain a source of concern as they struggle to keep up with larger firms that have been booming as of late.”

In other economic data Thursday, initial jobless claims for the week ended May 28 totaled 200,000, a decline of 11,000 from the previous week and below the 210,000 estimate, according to the Labor Department.

Continuing claims fell to 1.31 million, the lowest total since Dec. 27, 1969, and indicative that while hiring may be slowing, the pace of layoffs looks muted.

Also, first-quarter productivity was revised slightly higher but still reflected a decline of 7.3%, the biggest tumble since 1947. Unit labor costs jumped by 12.6%, the biggest increase since the third quarter of 1982, according to the Bureau of Labor Statistics.

The biggest change in the ADP count came in leisure and hospitality, the sector most hit most by restrictions and which has been a leader throughout the recovery. May saw new hires of just 17,000, even as the summer tourism season gets set to hit full swing.

Education and health services led sectors with growth of 46,000, while professional and business services was next with 23,000 and manufacturing added 22,000. Service-providing jobs grew by 104,000, while good producers added 24,000. The information and construction sectors both lost 2,000 payrolls through the month.

Companies with 500 or more workers led with payroll gains of 122,000, while midsize firms contributed 97,000.

The report comes the day before the BLS issues its more closely followed nonfarm payrolls count, which is expected to show a gain of 328,000 following April’s 428,000. The unemployment rate is forecast to edge down to 3.5%, which would tie for the lowest since December 1969.

The ADP report previews the government’s own nonfarm payrolls report that’s set to be published on Friday. Though the ADP report and the government’s counts have diverged throughout the pandemic, the Thursday reading hints that May job creation could fall well short of economists’ expectations and show the hiring recovery slowing dramatically.

MANAGING EDITOR: CARSON CHOATE

PHOTO CREDITS: BUSINESS INSIDER

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