Another weaker-than-expected reading for private sector job gains sets up a complicated May non-farm payroll report on Friday.
Updated at 8:25 am EST
The U.S. economy added far few private sector jobs than expected last month, payroll processing group ADP said Thursday, setting up a possibly weaker reading for the official May employment report tomorrow as Americans continue to leave the workforce at a near record pace and industrial sector companies hint to a hiring pullback.
ADP said in its National Employment Report, which it complies with Moody’s Analytics, that private sector jobs grew by 128,000 last month, well shy of Street forecasts of a 300,000 total, and the smallest monthly gain in two years. The final reading for April was also revised lower, by 45,000 positions, to 202,000.
The data follows figures from the Labor Department yesterday showing a near record 4.4 million Americans quit their jobs in April, leaving a higher-than-expected 11.4 million positions left unfilled.
An otherwise solid reading for manufacturing activity in May, based on closely-watched ISM data, was marred by suggestions that factories will likely cut-back on hiring in the coming months as supply chain disruptions and input cost increases complicate production.
“Under a backdrop of a tight labor market and elevated inflation, monthly job gains are closer to prepandemic levels,” said ADP’s chief economist Nela Richardson. “The job growth rate of hiring has tempered across all industries, while small businesses remain a source of concern as they struggle to keep up with larger firms that have been booming as of late.”
Stock market futures were broadly unchanged following the data release, but still suggest modestly higher opening bell gains, with contracts tied to the Dow Jones Industrial Average suggest a 125 point opening bell advance. Futures linked to the broader S&P 500 are priced for a 17 point advance. Nasdaq Composite futures, meanwhile, are looking at a 65 point bump.
The Bureau of Labor Statistics will publish its official employment report Friday, with economists looking for a net jobs gain of around 325,000, a slight but not hugely significant slowdown from the 428,000 gain recorded in April.
Average hourly earnings gains are expected to hold at 0.4% while the headline unemployment rate is forecast to tick lower, to a multi-decade trough of around 3.5%.