The U.S. labor market posted another month of surprising strength in May as companies added jobs at a much higher-than-expected pace, according to a report released Thursday from payroll processing firm ADP.
Private employment increased by a seasonally adjusted 278,000 for the month, ahead of the Dow Jones estimate of 180,000 and just below the downwardly adjusted 291,000 in April. The May increase brought salary growth so far in 2023 to 1.09 million.
The ADP report noted that the distribution of functional grains was “fragmented” during the month, with increases concentrated in leisure and hospitality, which added 208 thousand jobs, and natural resources and mining, which saw gains of 94 thousand.
Construction added 64,000 jobs, but many other categories saw declines.
For example, manufacturing saw a decrease of 48,000, financial activities lost 35,000, and education and health services fell by 29,000. Trade, transportation and utilities posted an increase of 32,000 while the other services category added 12,000.
From a volume perspective, companies with 500 or more workers lost 106,000 jobs. Small businesses, with fewer than 50 workers, added 235,000 jobs.
One notable area for ADP was the slowdown in the pace of wage gains, with annual wages rising 6.5% in May but less than the 6.7% increase in April. Those changing jobs posted an annual increase of 12.1%, down a percentage point from the previous month.
“This is the second month that we’ve seen a full percentage point drop in wage growth for job changers,” said Nella Richardson, chief economist at ADP. “Wage growth is slowing significantly, and wage-driven inflation may be less of a concern for the economy despite strong employment.”
The ADP statistic comes a day ahead of the closely watched Labor Department nonfarm payrolls report, which is expected to show payrolls growth at 190,000 in May after an increase of 253,000 in April.
The ADP report is a precursor to the government’s census, although the two can sometimes differ significantly. The Labor Department said private payrolls rose by 230,000 in April.
The payroll gains came despite the Federal Reserve’s efforts to tackle inflation and slow the labor market through a series of interest rate increases. Central bank officials have said in recent days that they may support skipping another hike in June as they weigh the impact of policy tightening that began in March 2022.
A separate report on Thursday showed that initial claims for unemployment benefits changed little last week.
Jobless claims totaled 232,000 for the week ended May 27, up 2,000 from the previous week and slightly below the Dow Jones estimate of 235,000. Continuing claims also rose to 1.795 million.
“Beer fan. Travel specialist. Amateur alcohol scholar. Bacon trailblazer. Music fanatic.”