ADP National Employment Report: Private Sector Job Creation Slows in May

The ADP National Employment Report conducted by payroll processing firm ADP said 173,000 people were added to private sector payrolls in May, missing the median forecast. April payrolls were revised higher by 10,000 to 166,000.

“Job creation appears to have slowed as we move further into 2016,” said Ahu Yildirmaz, VP and head of the ADP Research Institute. “Challenging global conditions affecting hiring at large companies and a tightening labor market for skilled workers are among the factors that may be contributing to the slowdown.”

Economists surveyed by Reuters had forecast the payroll processing firm’s report would show an increase of 175,000 jobs, with estimates ranging from 105,000 to 200,000. Further, with stagnant wages remaining a major problem for American workers and the overall U.S. economy, it is another disappointing month relating to the sectors creating the positions.

Goods-producing employment, which typically offers higher-paying jobs, fell by 1,000 jobs in the month of May after losing another 7,000 (revised) in April. The construction industry added 13,000 jobs, mirroring gains in the previous month.

Unfortunately, the manufacturing sector lost another 3,000 jobs after losing 10,000 the previous month. While the Institute for Supply Management’s gauge of national manufacturing activity hovered above contraction last month, regional data showed widespread contraction (as PPD previously reported).

Service-providing employment, which typically offers lower-paying jobs, rose by 175,000 jobs in May. That’s a slight increase over April’s upwardly revised 173,000, but the sector continues to disproportionately influence the headline jobs number in both the ADP National Employment Report and Labor Department report conducted by the Bureau of Labor Statistics.

The ADP report indicates that professional/business services contributed 43,000 jobs, up from April’s upwardly revised 38,000. Trade/transportation/utilities increased by 28,000, up slightly from the 24,000 jobs added the previous month. Financial activities added 13,000.

“Job growth has moderated this spring as energy companies and manufacturers shed jobs,” said Mark Zandi, chief economist of Moody’s Analytics. “Retailers are also more circumspect in their hiring. Despite the recent slowdown, job growth remains strong enough to reduce underemployment.”

Since the Great Recession, and for the first time ever in U.S. history, more small businesses have gone out of business each year than not. They represent or account for roughly 70% of all jobs created in the U.S. economy.

In May, private sector payrolls for businesses with 49 or fewer employees increased by 76,000 jobs, down sharply from an upwardly revised 101,000 in April. Companies with 50-499 employees increased employment by 63,000, up from last month’s 39,000. Employment at large companies–or, those with 500 or more employees–increased by 34,000, up from April’s 25,000.

Companies with 500-999 employees added 11,000 and companies with over 1,000 employees added 24,000 this month.

The ADP National Employment Report is conducted in collaboration with Moody’s Analytics.