Payroll Report Misses, Casts Shadow Over Friday Jobs Report

Payroll Report Misses, Casts Shadow Over Friday Jobs Report

On Wednesday, payroll firm ADP reported that the economy added 135,000 jobs in May. Economists had expected an increase of 165,000. ADP also lowered its previously reported April number to 113,000 jobs added, from 119,000 originally reported. While ADP uses a different measurement than the Labor Department, the two’s trends are consistent. ADP’s number suggests Friday’s Jobs Report will disappoint. 

Businesses with fewer than 50 employees added 58,000 jobs in May, while larger firms added a total of 78,000. There are around 4 million firms with fewer than 50 employees. The modest job gains in May indicate considerable weakness in the small business sector.

“The majority of new jobs in May came from the service-providing sector, which added a total of 138,000 jobs, while the goods-producing sector recorded a loss of 3,000 jobs”, Carlos Rodriquez, CEO of ADP said in a statement. “Notably, a gain of 5,000 jobs in the construction industry during May was offset by a decline of 6,000 lost jobs in the manufacturing industry.”

The loss of jobs in the goods-producing sector is consistent with a report earlier this week that manufacturing was contracting. Both are indications that the overall economy is slowing down. Manufacturing had been a consistent bright-spot during our slow economic recovery. If the sector continues to contract, the economy will likely slip into recession. 

A host of economic data has turned negative lately, increasing the interest in Friday’s Jobs Report from the Labor Department. The economy needs to gain 150-200k jobs a month to keep pace with population growth. Recent months have been far under this level, preventing the recovery from gaining strength. Friday’s report could foreshadow another “summer bummer” for the economy.   


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