Job Growth Scare: Private Payrolls Rise Just 27,000 in May

A Hawkins-Welwood Homes employee applies the final touches to a foundation as construction on a luxury townhome is shown at rear Wednesday, May 16, 2012, in Plano, Texas. A measure of future U.S. economic activity fell in April, the first setback after six months of increases, reflecting weakness in housing …
AP File Photo/Tony Gutierrez

Private sector payrolls added just 27,000 new jobs in May, according to a report Wednesday from payroll processing firm ADP and Moody’s Analytics. Economists had forecast private payroll growth of 175,000.

The dive in the ADP forecast is likely an exaggeration of the job situation, according to Moody’s economist Mark Zandi.

“Last month overstated the case, and this month understates it,” Zandi said on CNBC after the number was released.

Private payrolls rose 271,000 in April, according to Moody’s. That was down 4,000 from the earlier reported figure. The Labor Department’s figures for April showed private payrolls rising by 236,000.

“The reality is that the economy’s growth rate is slowing,” Zandi said on CNBC.

If ADP’s forecast proves an accurate predictor of the official employment situation report due Friday, expectations for a Fed rate cut will likely intensify.  There have been several indicators that economic growth softened in April and May, although job creation was strong in April after a very weak February.

“Job growth is moderating,” Zandi said in a statement. “Labor shortages are impeding job growth, particularly at small companies, and layoffs at brick-and-mortar retailers are hurting.”

The ADP report says small business, those with 50 or fewer employees, shed 52,000 jobs. Companies with between 50 and 499 employees added 11,000 jobs. Larger companies added 68,000.

Construction lost 36,000. Natural resources and mining jobs declined 4,000 and manufacturing jobs shrank by 3,000.

Health care and social assistance added 34,000. The professional and business service and leisure and hospitality categories also added significant amounts of jobs.

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