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The private sector created the fewest jobs in nine years in May, a surprisingly soft pace of growth that could suggest the US labor market is cooling down.
The ADP National Employment Report out Wednesday showed the private sector added 27,000 jobs last month, well below economist forecasts for a 185,000 increase and the slowest pace since September 2010.
“Payroll growth was bound to slow in May, following April’s unexpected strength, but this is a much bigger slowdown than we expected,” said Ian Shepherdson, the chief economist at Pantheon Macroeconomics. “ADP’s model is not always reliable, but this is such a big miss that we have to temper our forecast for Friday’s official number.”
ADP’s model uses official employment data as well as information from companies that use its payroll-processing services.
The Bureau of Labor Statistics is scheduled to release its May employment report, which includes both private and public sector jobs, on Friday. Economists expect that to show the US economy added 185,000 nonfarm payrolls last month.
Economists noted that escalating trade tensions could further weigh on growth in the labor market. President Donald Trump has increased tariffs on China and laid out plans to expand them to all imports. In a separate move last week, he threatened to levy duties on all imports from Mexico.
“We also should keep in mind that the May ADP report covers a period too early to reflect a full reaction to the recent escalations in trade policy that began around the middle of May,” said Daniel Silver, an economist at JPMorgan.
