ADP Finds Private Sector Added 173,000 Jobs in May

Private sector employment grew by 173,000 jobs in May, according to payroll giant ADP, in a sign of slowing job growth.

Small businesses with 49 or fewer employees added 76,000 jobs in May, down from an upwardly revised 101,000 in April, according the ADP National Employment Report. That figure included 38,000 jobs at small businesses with between one and 19 employees, and 38,000 at companies with between 20 and 49 employees.

Midsize businesses with between 50 and 499 employees gained 63,000 jobs in May, up from 39,000 in April.

Employment at large companies–those with 500 or more employees–increased by 34,000 in May, up from April’s 25,000. That total includes 11,000 jobs at companies with between 500 and 999 employees and 24,000 at companies with 1,000 employees or more.

“Job creation appears to have slowed as we move further into 2016,” said Ahu Yildirmaz, vice president and head of the ADP Research Institute, in a statement. “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.”

Service-providing employment rose by 175,000 jobs in May, a slight increase over April’s upwardly revised 173,000. The professional and business services sector, which includes accounting, tax preparation and other services, contributed 43,000 jobs in May, up from April’s upwardly revised total of 38,000 jobs. The combined trade, transportation and utilities sector grew by 28,000 in May, up slightly from the 24,000 jobs added the previous month. The financial activities sector added 13,000 jobs in May. Franchise jobs increased 19,400 in May.

Goods-producing employment dropped by 1,000 jobs in May after losing a revised 7,000 jobs in April. The construction industry added 13,000 jobs in May, in line with the previous month. Meanwhile, the manufacturing industry lost 3,000 jobs in May after losing 10,000 in April.

Mark Zandi, chief economist of Moody’s Analytics, which compiles the monthly national employment report with ADP, said the job gains appear to be fairly broad-based, with the exception of the manufacturing and energy sectors. However, he acknowledged there seems to be some slowing of job growth in the past two to three months.

“I think it’s premature to conclude that this is going to be a persistent slowdown,” he said during a conference call with reporters Thursday. “We had been seeing job creation averaging around 200,000 per month year in and year out over the last five years. We do have to expect at some point—if not now, but certainly in the near future—a persistent slowing in job creation, in large part because the economy is now close to full employment. The unemployment rate is 5 percent and the underemployment rate is now 9.7 percent. There’s evidence that wage growth is picking up.”

Zandi believes there will be a slowdown in job growth in the not too distant future to around 100,000 a month to be more consistent with the growth in the working age population as more Baby Boomers retire.

He anticipates the official job numbers coming out Friday from the U.S. Bureau of Labor Statistics will indicate job growth of around 160,000 for May, in part because of the different ways that ADP and the BLS account for the Verizon workers who recently settled their strike and the fact that the BLS numbers also include public sector employees. Overall, he sees positive signs for the job market and the economy.

“It feels to me like the job market is very healthy and strong,” said Zandi. “Job creation is good. We’re seeing a definitive pickup now in wage growth. The growth in open job positons is near a record high. Layoffs are very, very low. We’ve seen a pickup in people quitting their jobs. That’s indicative of a healthy market because people don’t quit their jobs unless they feel like they can easily find another one. Hiring has picked up. It’s really hard to identify any significant blemish in the labor market. The fundamental strength of the U.S labor market is reason for optimism about the broader U.S. economy and really is the key to the global economy because those are jobs that support income growth and are necessary to support consumer spending in the United States that is so key to driving a lot of the growth in the rest of the world through our trade. As long as the U.S. job market hangs firm and tough, the U.S. economy and to some extent the global economy should do well.”

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