ADP Reports May Private Payroll Surge of 278,000, Surpassing Expectations

The U.S. labor market exceeded expectations once again in May, with companies adding jobs at a remarkable pace, according to a recent report from ADP, a payroll processing firm.

In the private sector, employment grew by a seasonally adjusted 278,000 in May, surpassing the Dow Jones estimate of 180,000. Although slightly lower than the revised figure of 291,000 in April, May’s increase brought the total payroll growth for 2023 to 1.09 million.

The ADP report highlighted that job gains were concentrated in the leisure and hospitality sector, which added 208,000 positions, and the natural resources and mining sector, which saw a gain of 94,000. Construction also experienced a notable increase of 64,000 jobs, while several other categories reported declines.

For instance, manufacturing suffered a decline of 48,000 jobs, financial activities lost 35,000 jobs, and education and health services decreased by 29,000. On the other hand, trade, transportation, and utilities added 32,000 jobs, and the other services category contributed 12,000 jobs.

In terms of company size, those with 500 or more workers lost 106,000 jobs, while small firms with fewer than 50 workers added 235,000 positions.

A noteworthy aspect of the ADP report was the slowdown in the pace of wage growth. Although annual pay in May still experienced a robust increase of 6.5%, it was slightly lower than the 6.7% rise in April. Job changers reported an annual increase of 12.1%, a decrease of one percentage point from the previous month.

Nela Richardson, ADP’s chief economist, commented on the pay growth slowdown: “This is the second month we’ve seen a full percentage point decline in pay growth for job changers. Pay growth is slowing substantially, and wage-driven inflation may be less of a concern for the economy despite robust hiring.”

The release of ADP’s report precedes the Labor Department’s nonfarm payrolls report, which is eagerly anticipated and is expected to show a job growth of 190,000 for May, following a gain of 253,000 in April.

While ADP’s report provides an indication of job trends, it may sometimes differ from the government’s figures. In April, the Labor Department reported a rise of 230,000 private payrolls.

Despite the Federal Reserve’s efforts to combat inflation and slow the labor market through interest rate increases, the U.S. continues to experience payroll gains. Recently, central bank officials have suggested the possibility of postponing another rate hike in June as they assess the impact of previous tightening measures implemented in March 2022.

In a separate report, it was revealed that initial filings for unemployment benefits remained relatively unchanged in the previous week. Jobless claims totaled 232,000 for the week ending May 27, a slight increase of 2,000 from the previous week but slightly below the Dow Jones estimate of 235,000. Continuing claims also saw a slight increase to 1.795 million.