Private Payroll Growth Smashes Expectations in May, ADP Says

The private sector kept up its hiring spree for a second consecutive month in May, data from the ADP National Employment Report indicated Thursday.

The nonfarm private sector grew payrolls by 278,000 after a gain of 291,000 in April, payroll processor ADP said.

This was far more than the 160,000 expected by economists. The April reading was revised down slightly from 296,000 to 291,000.

If the strength of the labor market seen in the ADP report carries through to the government’s official payrolls report on Friday, it will put pressure on the Federal Reserve to continue to raise interest rates at the June or July meeting. The Fed has signaled that it would prefer to skip the June meeting but incoming data on prices and employment have the market increasingly expecting another hike is possible in June.

The Department of Labor said Wednesday that job openings rose to 10.1 million at the end of April, reversing much of the softening in job vacancies seen since January. On Thursday morning, the Labor Department said that initial jobless claims edged up to 232,000, slightly below expectations and solidly within the range in which claims have been in for two months.

The goods-producing side of the economy added 110,000 jobs in May, a very solid showing. Manufacturing, however, shed 48,000 jobs, according to ADP. Natural resource and mining added a 94,000, a very high level of hiring. Construction added 64,000 workers, ADP said.

Services added 1680,00, led by a gain of 208,000 in leisure and hospitality. Trade, transportation, and utilities added 32,000.

Payrolls shrank in the finance, business, healthcare and education, and information sectors.

The Fed could find some comfort in the fact that wage gains are declining. For workers who stayed in the jobs, annual wage growth slowed again in May to 6.5 percent from 6.7 percent in April, according to ADP. For job changers, pay gains dropped a full percentage point to 12.1 percent.