Tuesday, March 31, 2015


WASHINGTON -- Private-sector employment growth decelerated sharply in May, according to Automatic Data Processing Inc.'s employment report released Wednesday, in another possible sign of a sputtering U.S. recovery.

Employment in the nonfarm private business sector rose a seasonally adjusted 38,000 in May, well below the 175,000 increase expected by economists. In April, private payrolls showed an increase of 177,000, ADP said.

"This is exceptionally weak," said Eric Green, chief market economist at TD Securities Inc. in New York.

"This was a dismal report, indicating a significant slowdown in job creation after six months of solid gains," said Nicholas Tenev, economist at Barclays Capital Research.

The ADP report confirmed fears among investors that the labor market is weakening. Weekly jobless claims have risen sharply over the past month, but analysts had been unsure how much weight to put on the data, given technical factors.

In May, employment in the service-producing sector rose 48,000, roughly one-third the 141,000 positions added during April, according to ADP.

Employment in the goods-producing sector fell by 10,000 after a 36,000 increase in April.

In May, employment fell by 19,000 among large businesses, but payrolls gained 30,000 among medium-sized businesses and 27,000 among small businesses.

On Friday, the government will report on U.S. nonfarm payrolls for May, data that also include government workers.

Economists polled by MarketWatch are looking for a gain of 175,000 in payrolls and for the nation's unemployment rate to tick lower to 8.9 percent from 9.0 percent in April.

That would mark a slowdown from the healthy 244,000 jobs added in April.

But in light of the weak private-sector increase derived in a sampling of ADP payroll reports, a number of analysts are now expecting growth in nonfarm payrolls to be much smaller in the government's May report.

However, Barclays Capital's Tenev said he was hesitant to revise his forecast of a 190,000 gain in May nonfarm payrolls, pointing to a "poor track record" of ADP in predicting payrolls in real time.

And in a separate sign of a weakening economy, the Institute for Supply Management said its manufacturing gauge fell to 53.5 percent in May from 60.4 percent in the prior month -- the biggest one-month drop since 1984.

This story has been archived and comments are now closed.