May Sees Surprise Drop in Private Sector Hiring: Only 37,000 New Jobs Added, Says ADP – What It Means for You

Private sector job growth hit a snag in May, marking the slowest pace in over two years. According to ADP, payrolls only increased by 37,000. That’s a sharp drop from the revised 60,000 in April and much lower than the anticipated 110,000. This figure is the weakest since March 2023.

Just two days before the Bureau of Labor Statistics releases their report, concerns are rising about the job market’s strength. Expected gains are around 125,000 with an unemployment rate steady at 4.2%. Although the ADP report and BLS numbers often diverge, it adds to the picture of an uncertain economic climate.

“After a strong start to the year, hiring is losing momentum,” noted Nela Richardson, ADP’s Chief Economist.

In the political arena, former President Donald Trump reacted by urging the Federal Reserve to lower interest rates. He expressed frustration about the Fed’s hesitance and highlighted that Europe has already made several cuts.

### Manufacturing Setbacks

In specific sectors, the goods-producing industries saw a loss of 2,000 jobs. Natural resources and mining jobs fell by 5,000. Manufacturing alone lost 3,000 positions, but construction added 6,000 jobs to help counterbalance the declines.

On the service side, there were some gains. Leisure and hospitality jobs rose by 38,000, and financial activities saw an increase of 20,000. However, these gains were offset by losses in other areas, like professional services and education, which lost 17,000 and 13,000 positions respectively.

Larger companies, those with over 500 employees, reported a loss of 3,000 jobs. In contrast, mid-sized firms gained 49,000 jobs. Interestingly, smaller businesses (with fewer than 50 employees) fell by 13,000.

### Wage Trends

Despite the job slowdown, wages remained relatively robust. Annual pay increased by 4.5% for employees who stayed in their roles and a notable 7% for those who switched jobs, both rates consistent with April’s figures.

Recent data paints a mixed picture for the job market. While the BLS indicated that job openings rose unexpectedly in April, surveys from Indeed showed weaker hiring intentions. Allison Shrivastava, an economist at Indeed, warned that the job market feels “gridlocked.”

### The Fed’s Perspective

Despite these challenges, Fed officials have maintained an optimistic view about the economy. However, they are also wary of how tariffs could impact both inflation and job growth. Fed Governor Lisa Cook mentioned the need for caution due to the current uncertainties.

As the Fed approaches their next meeting, analysts expect that interest rates will remain steady amidst these fluctuations.

This ongoing situation highlights the delicate balance in today’s labor market and the economic factors that are shaping it. Understanding these dynamics is crucial for navigating the future job landscape.



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