US private sector employers added far fewer jobs than expected in May, data out Thursday showed.
Hiring slowed to just 128,000 last month, ADP said. That was nowhere near consensus (figure below) and easily represented the slowest pace of hiring post-COVID.
Economists expected 300,000 from the headline. Out of nearly three-dozen forecasts, no one projected a print below 200,000.
April’s already disappointing headline was revised even lower.
With the obligatory caveat that ADP has been a poor predictor of NFP in the pandemic era, the figures didn’t bode especially well for Friday’s jobs report.
Worryingly, small businesses shed another 91,000 jobs in May on the heels of April’s big decline which, as it turns out, was even larger than initially reported. The two-month total amounts to 214,000 lost jobs (figure below).
Insult to injury: March’s 90,000 gain for small businesses was revised to show a meager increase of 11,000.
The breakdown within the services sector wasn’t encouraging. Leisure and hospitality added just 17,000 jobs.
With the exception of December 2020, when America was ramping up vaccinations while grappling with a vicious winter COVID wave, May’s leisure and hospitality hiring was the worst showing since the initial pandemic plunge.
Notably, hiring in leisure and hospitality has decelerated for three straight months, and is on the brink of flatlining ahead of a summer that’s supposed to be characterized by goods-to-services switching among consumers (figure above).
In the goods producing sector, construction lost jobs for only the second time since the onset of the pandemic.
There are multiple dynamics in play simultaneously. Obviously, workers are scarce. It’s possible there just aren’t that many people left to hire who still want a job. Small businesses are having a very difficult time competing for scarce workers against multinationals with deep pockets as wages spiral higher. And the Fed is hiking rates in an effort to cool the labor market.
Add it all up and what do you get?
“Under a backdrop of a tight labor market and elevated inflation, monthly job gains are closer to pre-pandemic levels,” Nela Richardson, ADP’s chief economist, said Thursday. “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.”
On the bright side, jobless claims fell last week to 200,000, below estimates.