Private Sector Jobs Grew By Only 38,000 in May

Companies in the U.S. added 38,000 workers to payrolls in May, according to figures from ADP Employer Services. Photographer: Matthew Staver/Bloomberg

 

May 31 (Bloomberg) -- Michael Feroli, chief U.S. economist at JPMorgan Chase & Co., talks about the performance of the U.S. economy. Consumer sentiment unexpectedly decreased in May to the lowest level in six months as Americans grew concerned over the outlook for jobs and the economy, while a measure of home prices dropped to a nine-year low. Feroli speaks with Mark Crumpton on Bloomberg Television's "Bottom Line." (Source: Bloomberg)

Companies in the U.S. added fewer workers than forecast in May, a sign that job growth is struggling to gain momentum, data from a private report based on payrolls showed today.
Employment increased by 38,000 last month, the smallest increase since September, from a revised 177,000 in April, according to figures from ADP Employer Services. The median estimate in the Bloomberg News survey called for a 175,000 advance for May.
Such gains in employment are insufficient to help the world’s largest economy accelerate after a surge in food and fuel costs earlier this year. Businesses added 207,000 jobs last month after a 268,000 gain in April and the jobless rate dipped to 8.9 percent from 9 percent, economists project a Labor Department report to show in two days.
“It is a warning shot across the bow that job growth is also weakening along with the other high frequency numbers,” Eric Green, chief market economist at TD Securities Inc. in New York, said in an e-mailed note to clients. “The weakness reflects a general slowdown and turn in sentiment that set in with the sharp rise in energy prices, disruptions from Japan, and to a lesser extent risk aversion stemming from the Greek fiasco.”
Stock-index futures dropped after the report. The contract on the Standard & Poor’s 500 Index maturing in June fell 0.4 percent to 1,338.6 at 8:37 a.m. in New York. Treasury securities rose, sending the yield on the benchmark 10-year note down to 3.02 percent from 3.06 percent late yesterday.

Survey Results

Estimates for the ADP data ranged from increases of 125,000 to 200,000, according to the Bloomberg survey of 37 economists.
Over the previous six reports, ADP’s initial figure was closest to the Labor Department’s first estimate of private payrolls in February, when it understated the gain in jobs by 5,000. The estimate was least accurate in December, when it overestimated the increase in employment by 184,000.
Another report today showed employers announced fewer job cuts in May than a year earlier, signaling the labor market is improving. Planned firings dropped 4.3 percent to 37,135 last month from May 2010, according to figures from Chicago-based Challenger, Gray & Christmas Inc. Government and nonprofit agencies had the most cutbacks.
Today’s ADP report showed a decrease of 10,000 workers in goods-producing industries, which includes manufacturers and construction companies. Employment at factories fell by 9,000.

Data Breakdown

Service providers added 48,000 workers, ADP said.
Companies employing more than 499 workers cut their workforces by 19,000 jobs. Medium-sized businesses, with 50 to 499 employees, created 30,000 jobs and small companies increased payrolls by 27,000, ADP said.
The drop in manufacturing may reflect supply disruptions caused by the earthquake and tsunami in Japan, Joel Prakken, chairman of Macroeconomic Advisers LLC in St. Louis, which produces the data with ADP, said in an interview on CNBC Television.
Some companies are already looking beyond the temporary slowdown and are making plans to expand payrolls further in 2012. General Motors Co. said last week it will invest $69 million and add 2,500 jobs to start making new models at the Detroit plant that builds the Chevrolet Volt plug-in hybrid as the automaker boosts U.S. production.
Overall payrolls, which include government workers, probably rose by 180,000 in May after climbing by 244,000 a month earlier, according to the median forecast of economists surveyed before the Labor Department’s June 3 report.
Federal Reserve officials have said the jobless rate “remains elevated” at 9 percent, one reason central bankers pledged at their last meeting to complete an asset-purchase plan by the end of this month and to keep borrowing costs near zero.
The ADP report is based on data from about 340,000 businesses employing more than 21 million workers.