Just 128,000 Jobs Added
The ADP employment report came in weaker than expected for May, with the private sector adding just 128,000 jobs over the month. The report is based on records from the payroll-processing firm. The consensus expectation was for an increase of 300,000. This was the weakest month for job growth in the ADP survey since the economy lost 19 million jobs in April 2020 as the pandemic hit the labor market.
Private-sector job growth in April was 202,000, revised lower from 247,000.
Employment rose in goods-producing industries by 24,000, with an increase of 22,000 in manufacturing, but a small decline in construction. Services-providing industries rose by 104,000, with moderate gains in with education/health services (46,000), professional/business services (23,000), and leisure/hospitality services (17,000).
Firms with fewer than 50 workers lost 91,000 jobs in May, while firms with 50 to 499 workers added 97,000. The largest firms added 122,000 jobs over the month. It is likely that smaller firms are having difficulties in competing with bigger ones for labor given the extremely tight job market.
The weaker than expected ADP report adds downside risk to PNC’s forecast for job gains of 285,000 in May when the Bureau of Labor Statistics releases the government’s monthly jobs report tomorrow. PNC expects private-sector job growth of 275,000, and the unemployment rate to decline to 3.5%, from 3.6% in April.
The biggest constraint on the labor market in the spring of 2022 is labor supply, not demand. Job openings are very high, but businesses are having difficulty in filling them. The Federal Reserve would be happy to have job growth slow over the course of 2022 to a more sustainable pace, reducing inflationary pressures. The central bank will raise rates over the course of 2022 to slow economic growth and gradually push inflation down to the Fed’s 2% objective.
The PNC Financial Services Group, Inc. is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.
