Private sector job growth increases by 278,000 in May, easily beating expectations
US companies added 278,000 jobs in May, keeping pressure on the Fed
Probability for July rate cut falls on strong jobs data
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Hiring by U.S. companies increased more than expected in May, pointing to a labor market that remains tight even in the face of higher interest rates, according to the ADP National Employment Report released Thursday morning.
Companies added 278,000 jobs last month, easily beating the 170,000 gain that economists surveyed by Refinitiv predicted. It is slightly below the revised 291,000 figure recorded last month.
The report comes as the Federal Reserve wages the most aggressive fight since the 1980s to crush inflation and slow the labor market with a series of rapid interest rate increases. Fed policymakers have made it clear that they anticipate unemployment to climb as a result of higher borrowing costs, which could force consumers and businesses to pull back on spending.
JOB OPENINGS UNEXPECTEDLY SURGE IN APRIL TO HIGHEST LEVEL IN 3 MONTHS
A general view shows construction workers standing before the Manhattan skyline and Empire State Building in New York City on Jan. 24, 2023. (ED JONES/AFP via Getty Images / Getty Images)
In a potentially welcoming sign for the Fed as it tries to wrangle inflation under control, wages cooled at a faster pace in May. Annual pay rose 6.5% in May down from 6.7% in April, according to the report. For workers who switched jobs, wages climbed 12.1%, down a full percentage point from the previous month.
"This is the second month we've seen a full percentage point decline in pay growth for job changers," said Nela Richardson, chief economist at ADP. "Pay growth is slowing substantially, and wage-driven inflation may be less of a concern for the economy despite robust hiring."
MAJORITY OF WORKERS REGRET QUITTING DURING ‘GREAT RESIGNATION
The distribution of job gains was "fragmented" in May, the report said, with the majority stemming from the leisure and hospitality industry, which added 208,000 new workers, and natural resources and mining, with a gain of 94,000.
A "Now Hiring" sign is seen outside a job fair at a Schneider Electric manufacturing facility in Hopkins, South Carolina, on Jan. 18, 2023. (Micah Green/Bloomberg via Getty Images / Getty Images)
The biggest losses, meanwhile, were concentrated in the manufacturing sector, which saw payrolls tumble by 48,000. Financial activities also shed 35,000 positions, while education and health services cut 29,000.
By size, medium and small businesses led the way in hiring last month, onboarding 140,000 and 235,000 workers, respectively. That is a reversal from prior months, in which small businesses struggled to find and retain workers. Large businesses lost 106,000 workers last month.
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The data precedes the release of the more closely watched May jobs report on Friday morning, which is expected to show that employers hired 190,000 workers following a gain of 253,000 in April. The unemployment rate is expected to inch higher to 3.5%.