The pace of job creation in the private sector decelerated significantly in May, reaching its lowest level in over two years, according to a report released by payroll processing firm ADP on Wednesday.
The report indicated that only 37,000 jobs were added in May, a stark decrease from the revised 60,000 in April and well below Dow Jones expectations of 110,000. This marks the smallest increase since March 2023.
These findings arrive just days ahead of the more closely monitored nonfarm payrolls report from the Bureau of Labor Statistics, which is projected to show an increase of 125,000 jobs while keeping the unemployment rate steady at 4.2%.
Although the two reports frequently vary—sometimes by substantial margins—the ADP’s figures provide additional insight into the labor market amid growing concerns over the overall economic climate.
“After a robust start to the year, hiring is losing momentum,” stated Nela Richardson, ADP’s chief economist.
In the wake of the release, President Donald Trump urged the Federal Reserve and its Chair Jerome Powell to reduce interest rates. On his Truth Social platform, he expressed frustration, stating, “‘Too Late’ Powell must now LOWER THE RATE. He is unbelievable!!! Europe has lowered NINE TIMES!”
Manufacturing Sector Experiences Job Losses
In May, goods-producing sectors experienced a reduction of 2,000 jobs. The natural resources and mining sectors lost 5,000 positions, while manufacturing saw a decline of 3,000. However, the construction industry added 6,000 jobs, offsetting some of the losses.
On the services side, employment gains were seen in leisure and hospitality, which added 38,000 jobs, and financial activities, which increased by 20,000. Despite these gains, declines in professional and business services (17,000), education and health services (13,000), and trade, transportation, and utilities (4,000) weighed down overall totals.
Small businesses, with fewer than 50 employees, lost 13,000 jobs, while larger firms with 500 or more employees reported a decline of 3,000. Conversely, mid-sized companies posted a gain of 49,000 jobs.
In terms of wages, annual pay increased by 4.5% for those who remained in their positions and by 7% for those who changed jobs, levels that remain “robust,” according to Richardson.
Recent economic data has painted a mixed picture for the labor market. While the Bureau of Labor Statistics reported an unexpected rise in job openings for April, other indicators, including surveys from employment platform Indeed and the National Federation of Independent Business, suggest weaker hiring intentions and openings.
“The market remains distressingly gridlocked, with limited hiring and low quits, and it can’t keep steadily cooling off forever before it just turns cold,” cautioned Indeed economist Allison Shrivastava after Tuesday’s job openings report.
Federal Reserve officials have generally maintained an optimistic view of economic conditions but have recently voiced concerns regarding the potential impact of President Trump’s tariffs on inflation and employment.
“I see the U.S. economy as still being in a solid position, but heightened uncertainty poses risks to both price stability and unemployment,” said Fed Governor Lisa Cook on Tuesday.
The Federal Reserve is anticipated to keep interest rates unchanged during their upcoming meeting in two weeks.
