US private sector employers added 278,000 jobs in May, data released on Thursday showed.
The blockbuster print blew away consensus and exceeded every estimate from nearly three-dozen economists who ventured a guess. The highest projection was 250,000.
ADP’s figures haven’t been the most reliable guide for the government’s nonfarm payrolls report in the pandemic era, but Thursday’s data certainly nodded in the direction of another hot NFP headline on Friday.
April’s ADP headline was revised marginally lower. As you can see from the visual, there’s no evidence, on net, of a private sector hiring slowdown.
Large employers actually shed more than 100,000 jobs last month, ADP said. But that was more than offset by a remarkable 375,000 new jobs across businesses with 499 or fewer employees.
The sector and industry breakdown admitted of a more nuanced assessment. Manufacturing dropped 48,000 jobs on the goods side, and information, financial activities, professional services and education and health shed 84,000 jobs between them in services. But leisure and hospitality added 208,000 positions, while construction and mining combined for 158,000.
ADP chief economist Nela Richardson expressed more optimism about the prospects for “immaculate disinflation,” although she didn’t use the term. “This is the second month we’ve seen a full percentage point decline in pay growth for job changers,” she said Thursday. “Pay growth is slowing substantially, and wage-driven inflation may be less of a concern for the economy despite robust hiring.”
That’s what you want: Robust hiring, but slower wage growth for so-called “switchers.” The latter is a disincentive for labor churn. Less churn means less desperation among employers, which in turn means less pressure to retain workers by offering higher pay (or offering higher pay to replace them when they leave).
Pay growth for “stayers” was 6.5% in May, according to ADP’s new “pay insights.” That figure for “changers” was 12.1%. The gap is the narrowest since September of 2021.
The figures came on the heels of a big upside surprise in the latest JOLTS report, which showed job openings across the US economy were back above 10 million on the last business day of April. Nevertheless, the same report showed quits receded, indicative of less labor churn.
Meanwhile, jobless claims came in below estimates again. Initial claims were 232,000 during the week to May 27, up from the prior week’s revised level, but below consensus, which expected 235,000. Continuing claims in the week to May 20 were 1.795 million, also below estimates.
All in all, Thursday’s data reinforced the notion that the US labor market is nowhere near rolling over, even if pay growth is moderating.
It’s a fascinating thing watching demographic shifts in realtime. The Baby Boomers are exiting the workforce and there are a lot of them that will continue to exit each year. Since QE and then Covid it seems fewer feel the need to “downsize” their homes, but they do need medical care, restaurants, trips, services, etc.
I predict this is the new normal for another decade.