Job creation in companies slowed to a slower pace than the recovery from the pandemic era in May, payroll processing company ADP reported on Thursday.
Private sector employment rose only 128,000 during the month, well below the Dow Jones 299,000 estimate and a 202,000 revised downward fall in April, which was initially reported as a gain of 247,000.
The big drop marked the worst month since the massive layoffs in April 2020, when companies sent home more than 19 million workers when the Covid outbreak caused a massive economic shutdown.
According to the ADP count, which usually differs slightly from government figures, salaries had risen by about 500,000 a month over the past year.
The slowdown in May hiring comes amid fears of a broader economic downturn. Inflation around its 40-year high, the ongoing war in Ukraine and a Covid-induced shutdown in China, which has since risen but with conditions, have raised fears that the US could being on the brink of recession.
The small business had the biggest impact during the month, as companies with fewer than 50 employees cut payrolls by 91,000. As of this fall, 78,000 layoffs came from companies with fewer than 20 employees.
“In the context of a tight labor market and high inflation, monthly earnings are closer to pre-pandemic levels,” said ADP chief economist Nela Richardson. “The employment growth rate of hiring has moderated in all industries, while small businesses continue to be a source of concern as they struggle to keep up with the larger companies that have been booming lately.”
In other economic data on Thursday, the initial unemployment claims for the week ended May 28 amounted to 200,000, a decrease of 11,000 from the previous week and below the estimate of 210,000, according to the Department of Labor.
Ongoing claims fell to 1.31 million, the lowest total since December 27, 1969, and indicates that while hiring may be slowing, the pace of layoffs seems quiet.
In addition, productivity in the first quarter was revised slightly higher, but still reflected a fall of 7.3%, the largest fall since 1947. Unit labor costs rose by 12.6%, l largest increase since the third quarter of 1982, according to the Bureau of Labor Statistics. .
The most important change in the ADP count has been leisure and hospitality, the sector most affected by the restrictions and which has been a leader throughout the recovery. May had new hires of just 17,000, though the summer tourism season is nearing its peak.
Education and health services led the sectors with growth of 46,000, while professional and business services followed with 23,000 and manufacturing added 22,000. Jobs in service delivery grew by 104,000, while good producers added 24,000.
Companies with 500 or more employees led with payroll increases of 122,000, while medium-sized companies contributed 97,000.
The report comes the day before the BLS issues its latest non-farm payroll count, which is expected to show a gain of 328,000 after April’s 428,000. The unemployment rate is expected to fall to 3.5%, the lowest since December 1969.
The BLS count includes government jobs, unlike the ADP, which is a private payroll count.