Private sector employers added 178,000 jobs in May, according to payroll giant ADP, as the economy continued to grow in the wake of the new tax law.
Small businesses added 38,000 jobs in May, including 15,000 at companies with between one and 19 employees, and 23,000 at businesses with between 20 and 49 employees. Midsized businesses with between 50 and 499 employees gained 84,000 jobs. Large businesses added 56,000 jobs, including 23,000 at companies with between 500 and 999 employees and 34,000 at corporations with 1,000 employees or more.
The goods-producing sector added 64,000 jobs in May, while the service-providing sector gained 114,000 jobs, including 61,000 in professional and business services, which includes accounting, tax preparation and other types of services. Franchise businesses added 29,500 jobs.
“The hot job market has cooled slightly as the labor market continues to tighten,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, in a statement. “Health care and professional services remain a model of consistency and continue to serve as the main drivers of growth in the services sector and the broader labor market as well.”
Mark Zandi, chief economist of Moody's Analytics, which compiles the monthly national employment report with ADP, agreed that job growth is strong, but slowing, as businesses are unable to fill a record number of open positions.
“We have seen some slowing in job growth,” Zandi said during a conference call with reporters Wednesday. “I suspect that in all likelihood that is due to the increasing difficulty businesses are having in filling open job positions.”
The U.S. Bureau of Labor Statistics recently reported a record high of 6.6 million job openings. “Only one sector of the economy is struggling where demand is soft and that’s in the brick-and-mortar retail industry,” Zandi noted. “Brick-and-mortar retailers are responding by reducing their payrolls. My sense is that’s primarily due to competition from online retailers. Outside of brick-and-mortar retailers, demand for labor is uniformly robust and strong. Wage growth is picking up. It’s still low by historical standards but accelerating.”
He is seeing acceleration in wages for young new entrants to the workforce, which he noted is a good indicator across the labor market. “The growth in the economy is now being constrained by the lack of finding appropriate workers to fill open job positions,” said Zandi. “That will only intensify going forward, with the deficit-financed tax cuts.”
Zandi predicted that the unemployment rate, which dipped last month to 3.9 percent, will be closing in on 3 percent by the end of the decade.
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