ADP has released its estimate of private sector employment in May. The net number of new jobs was 37,000, a third of the consensus estimate that called for 110,000 and about 39% lower than the 61,000 in April. Also, the hiring rate marked the slowest pace since March 2023.
Pay changed little in May, with growth for job-stayers at 4.5% and 7% for those who changed employers.
The ADP numbers are frequently lower than the federal government figures and are based on anonymized payroll data on more than 500,000 companies with a total of more than 25 million workers. The April jobs report from the Bureau of Labor Statistics showed 177,000 new jobs. Consensus expectations for May are 125,000 additions, a report that's set to come out Friday.
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"After a strong start to the year, hiring is losing momentum," ADP Chief Economist Dr. Nela Richardson said in prepared remarks. "Pay growth, however, was little changed in May, holding at robust levels for both job-stayers and job-changers."
The data showed an increase of 51,000 jobs in smaller mid-sized companies, with 50 to 249 employees. Every other category was down: small (-13,000), bigger mid-sized with 250–499 employees (-2,000) and large (-3,000).
The increases were in leisure and hospitality (+38,000); financial activities (+20,000); information (+8,000); construction (+6,000); and other services (+4,000). The drops were in professional and business services (-17,000); education and health services (-13,000); natural resources and mining (-5,000); trade, transportation, utilities (-4,000); and manufacturing (-3,000).
By geographic region, the Northeast saw a change of -19,000 jobs and the South, -5,000. Meanwhile, the Midwest saw a gain of 20,000 and the West added 37,000.
“Tariff uncertainty and high interest rates weighed on job growth in May,” said Comerica Bank Chief Economist Bill Adams in emailed remarks. “The job market has downshifted in the second quarter. The Fed will take notice of slower job growth, but this won’t be enough to convince them to cut interest rates near term. Labor force growth will also be slower in 2025 due to less immigration, so less job growth is needed to hold the unemployment rate steady.”
In related news, the Institute for Supply Management’s Services PMI was 49.9%, 170 basis points lower than April’s 51.6%. That is “not indicative of a severe contraction, but rather uncertainty that is being expressed broadly among ISM Services Business Survey panelists,” Services Business Survey Committee Chair Steve Miller said in prepared remarks.
A one-word comment from BMO Economics was, “Ugh.” This was the first contraction since June 2024. It said that the tariffs played a big role.
The ISM report noted that the unpredictability of tariffs threw residential construction supply chains into “chaos” as major HVAC equipment vendors passed on cost increases. “Planning is difficult for community projects that could be scheduled for the next 22 to 30 months,” the report said. In transportation and warehousing, "Tariffs have increased the cost of doing business. It’s too early to tell what the lasting impact of this will be.”
The ISM Manufacturing PMI was 48.5%, 20 basis points less than in April. Comerica’s Adams said on Monday: “The headwinds from tariff increases are starting to show up in economic data.”
He added, “The Fed will notice the widespread price increases reported in the ISM Manufacturing PMI survey. The ISM PMI’s price index tends to be a leading indicator of PPI and CPI inflation, and points to inflation picking up in the second half of the year.”
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