Updated 8:25 a.m. EST
The U.S. economy added far fewer private sector jobs than expected last month, payroll processing group ADP said Thursday, setting a possibly weaker reading for the official jobs report from May tomorrow as Americans continue to leave the labor force at a near record rate and companies in the industrial sector hint at a pullback in hiring.
ADP said in its National Employment Reportt, which is in line with Moody’s Analytics, private sector jobs rose by 128,000 last month, well below Street’s forecast of a total of 300,000, and the smallest monthly gain in two years . April’s final reading was also revised down 45,000 positions to 202,000.
The data follows yesterday’s Department of Labor figures showing a near record 4.4 million Americans quit their jobs in Aprilleaving a higher than expected number of 11.4 million vacancies.
An otherwise strong reading of manufacturing activity in May, based on closely watched ISM data, was marred by suggestions that factories are likely to cut hiring in the coming months as supply chain disruptions and rising input costs complicate production.
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“Amid a tight labor market and high inflation, monthly job gains are closer to pre-pandemic levels,” said ADP Chief Economist Nela Richardson. “The rate of growth in hiring has moderated across all industries, while small businesses remain a concern as they struggle to keep pace with large companies that have boomed in recent times.”
Stock futures were broadly unchanged after the data release, but still suggest slightly higher opening bell gains, with contracts tied to the Dow Jones Industrial Average suggesting an opening bell lead of 125 points. Futures contracts related to the entire S&P 500 are priced for a 17 point lead. Nasdaq Composite futures, meanwhile, are looking for a 65-point rise.
The Bureau of Labor Statistics will release its official jobs report on Friday, with economists looking for a net job gain of about 325,000, a slight but not hugely significant slowdown from April’s gain of 428,000.
Average hourly earnings are expected to hold steady at 0.4%, while the overall unemployment rate is expected to decline, to a multi-decade low of around 3.5%.