Bloomberg News/Landov
The numbers: Private-sector employers hired just 27,000 people in May, payroll processor ADP said Wednesday. That badly missed the forecast of 175,000 jobs from economists surveyed by Econoday.
What happened: Small business slashed 52,000 jobs in May, ADP said. Medium-sized firms added 11,000, and large companies added 68,000.
Goods-producing industries shed 43,000 jobs, mostly concentrated in a 36,000 loss for construction; while the service sector added 71,000.
“The economy’s weakening,” ADP architect Mark Zandi said on CNBC this morning. “This number overstates the case,” he added. It’s important to note Zandi used the exact same words last month in describing an upside surprise.
“Growth is slowing, and it’s slowing very sharply,” Zandi added. “Business capex is dead in the water.”
Big picture: ADP’s report can be used as an early read on the closely-watched Labor Department jobs report that’s released two days later, but its track record is imperfect. In April, however, ADP came close: it reported that 275,000 private-sector jobs had been added, and the BLS reported a gain of 263,000. ADP revised its April read down to a gain of 271,000.
Most economists believe the heady pace of job creation over the past few years will inevitably start to slow soon. The big question now is how much of an impact the Trump administration’s trade wars will have. Zandi said on Wednesday that he does not believe the impact of the trade wars is showing up in the employment figures yet, however.
See also: Economic expansion poised to become longest in U.S. history, leading indicators show
Market reaction: Stocks DJIA, +0.67% rallied on Tuesday after Federal Reserve officials suggested they would be open to cutting interest rates — or keeping increases on hold — while trade disputes continue. But on Wednesday, the 10-year U.S. Treasury note yield declined after the ADP report.
Related: How Mexico tariffs could hurt $600 billion in cross-border trade — and the U.S. economy
Add Comment