U.S. private payrolls increased broadly in May, but economists cautioned against viewing the rise as a sign of a strengthening labor market, noting that other indicators continued to point to stabilizing conditions.
Private employment rose by 122,000 jobs last month after a downwardly revised 105,000 gain in April, the ADP national employment report showed on Wednesday. Economists polled by Reuters had forecast private employment increasing by 117,000 jobs after a previously reported 109,000 advance in April.
Last month’s increase in hiring was across businesses of all sizes, and was led by the education and health services sector, which added 57,000 jobs. Trade, transportation and utilities payrolls rose 36,000. But there were job losses in the information and natural resources and mining industries.
The ADP report is jointly developed with the Stanford Digital Economy Lab, and was published ahead of the Bureau of Labor Statistics’ more comprehensive and closely watched employment report for May on Friday. ADP has been a poor predictor of the BLS’s private payrolls estimate.
“The indicators with a better track record of forecasting payrolls – the hiring intentions indexes of the NFIB and regional Federal Reserve surveys, as well as the job availability differential of the Conference Board’s survey – have weakened in recent months,” said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. “Evidence that the labor market is regaining momentum remains unconvincing.”
The labor market has regained its footing after wobbling last year amid uncertainty stemming mostly from tariffs. While the U.S.-Israeli war with Iran has raised commodity prices and fanned inflation, layoffs have remained historically low, anchoring the labor market.
The Labor Department’s Job Openings and Labor Turnover Survey, or JOLTS report, on Tuesday showed a surge in job openings in April, but they were concentrated in a single sector. Hiring decreased and layoffs fell, suggesting the solid increase in nonfarm payrolls in April was mostly due to lower layoffs.
Nonfarm payrolls likely increased by 85,000 jobs in May after rising 115,000 in April, a Reuters survey of economists predicted. The unemployment rate is forecast to be holding steady at 4.3%.
Financial markets expect the Federal Reserve will keep its benchmark overnight interest rate in the 3.50%-3.75% range into next year, while monitoring the inflation fallout from the war.
Inflation increased at its fastest pace in three years in April, the government reported last week.
(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci )
