Employers in the private sector added 135,000 jobs from April to May, according to payroll giant ADP, which represented an increase over the previous month, but still indicated some softening of the employment picture.
April’s job gains were also revised downward to 113,000 from 119,000. ADP reported that small businesses added 58,000 jobs in May, including 37,000 in businesses with between one and 19 employees, and 21,000 in businesses with between 20 and 49 employees.
Midsize businesses with between 50 and 499 employees added 39,000 jobs. Large businesses added 39,000 jobs, including 6,000 in businesses with between 500 and 999 employees, and 33,000 jobs in businesses with 1,000 employees or more.
Most of the job gains came in the service-providing sector, which added 138,000 jobs. The goods-producing sector, in contrast, lost 3,000 jobs in May.
The professional and business services sector, which includes accounting and tax services, added 42,000 jobs in May. The financial activities sector added 7,000 jobs. The combined trade, transportation and utilities sector added 31,000 jobs. The construction sector added 5,000 jobs, but the manufacturing sector lost 6,000 jobs.
“The number was weak, 135K, which was below market expectations for employment growth,” said Mark Zandi, chief economist at Moody’s Analytics, which compiles the monthly employment report with ADP. “It would be a break from some of the stronger data we’ve been getting from the BLS in recent months. If you look at the Bureau of Labor Statistics employment data, monthly payroll employment has been growing roughly 175,000 per month, and that’s been the case over the past couple of years. The ADP number this month and over the past several months would suggest that the rate of job growth is beginning to decelerate. Instead of accelerating, which of course is what everyone would like to see, we are seeing some deceleration in job growth in the spring and going into the summer.”
The weakening job growth may be a result of the tax increases that were part of the fiscal cliff deal at the beginning of the year, and automatic spending cuts from the budget sequester, but Zandi acknowledged that there isn’t “proof positive” of that. There has also been some weakening of employment in the leisure and hospitality industry, as well as the professional services sector, which could be affected by small businesses adjusting their employee headcount as the health care reform law requirements take effect.
The data suggests that job growth is slowing down heading into the summer months. “It’s not like we’re falling off a cliff, but it feels like we’re throttling back a bit,” said Zandi.